UK Property Market – July 2020 Update
|Halifax House Price Index – June 2020|
|Average Price||Monthly Change||Quarterly Change||Annual Change|
June saw a 0.1% decrease in house prices from May, marking the fourth consecutive month of falling house prices. Moreover, the index measured prices as have lost just under 1% of their value during Q2 (i.e. April, May and June). While this is similar to house price movement seen at the peak of the financial crisis, the annual change shows that house prices are still 2.5% above their level this time last year, showing the strength of the UK real estate market pre-pandemic.
Post Lock-down Bounce
The Royal Institute of Chartered Surveyors (RICS) claimed in a monthly update that the number people looking to purchasing a home increased sharply, while the opening of the market provided further scope for people to list their properties. Within the lettings sector, the survey reported that demand from tenants for rental properties appeared to return to growth again. Interestingly, in spite of defaults during lock-down, respondents to the monthly survey expected a growth in rent of 1% nationally for the next year.
Stamp Duty Boost
As discussed last week, the cut to stamp duty is expected to provide strong support to this return to growth. Rightmove recently released analysis of the areas expected to benefit most from the cut in stamp duty. Based on a raise in the threshold up to £500,000, purchasers of properties in the South East and London are forecast to save between £10,000-£15,000 based on the average asking price for June 2020. The article also claims that requests from prospective sellers to have their homes valued has now hit a record high, perhaps suggesting a concurrent rise in people looking to release liquidity from their properties in many cases. Speaking on the tax cut, Rightmove Real Estate expert Miles Shipside said that ‘lock-down prevented 175,000 would be sellers from coming to market so we hope this Stamp Duty holiday will provide the spur for those missing movers to come to market.’ 
Flight to the Suburbs
Intuitively, the pandemic has brought about a fundamental change in the type of property people are looking for. Speaking to the FT, Zoopla’s Director of Research Richard Donnell states that ‘Covid has created a one-off situation: you lock up millions of people in their houses and the whole population re-evaluates what home means for them’. So fundamental is the change in stance when it comes to demand that London was one of a handful of locations in the UK where demand was lower than before lock-down. Whether this change will be lasting remains to be seen however, as people begin to return to offices and jobs in the metropolitan area. Ultimately, the change in demand will depend on the severity of the resurgence of Covid-19. If necessitating further lock-down measures, the change in the pattern of demand is likely to evolve from incidental to structural.
A survey of editorials on the housing market’s prospects for the near future are overwhelmingly positive, based on the idea that a return to positive growth is going to occur in a linear fashion. This is a fair assumption, but fails to adequately consider the possibility of a severe resurgence of Covid-19. Any further lockdown measures will hamper the market’s ability to transact, while measures currently propping up the housing market such as quantitative easing and the cut to stamp duty are temporary. Once these measures expire, it will be interesting to see if the underlying market can support such strong demand.
The View from Canary Wharf
Here at Yielders, we are watching the fluctuations of the market closely. As a cash buyer, we are uniquely placed to take advantage of factors such as falling house prices and the cut to stamp duty. We are currently working hard to analyse a number of exciting opportunities for the months ahead, news of which you will continue to hear about on an ongoing basis. We are also currently reviewing properties submitted to us, straight from Yielders users – for more information, please send an email to email@example.com and one of the Investments Team will get back to you.
Yielders does not provide any advice in relation to investments and you must rely on your own due diligence before investing. Investments in property and unlisted shares carry risk and you may not receive the anticipated returns and your capital may be at risk.