2020 has been an unpredictable year for the UK property market.
In January, spirits were high. Boris Johnson’s victory in the previous month’s General Election had triggered a surge in investment activity across the UK; domestic and international investors were optimistic that with a majority government in power, Brexit would go ahead and there would be greater certainty about what the future might hold.
As a result of this positive sentiment, at the start of the year research by Zoopla recorded an annual rate of house price growth of 3.9% – a 33-month high.
Fast forward a few months and we now find ourselves in challenging, unprecedented times. COVID-19 has had direct and indirect implications on the UK real estate market, while some lenders are pulling products off the market and not accepting new inquiries.
The questions beckons – how will COVID-19 affect the property portfolios of investors?
Putting things in perspective
One cannot downplay the significance of this health pandemic. However, from an investment perspective, there are good reasons to be optimistic about the future performance of real estate.
Separate indexes released by Halifax and Nationwide revealed that house prices had increased by 3% in the 12 months leading to March 2020.
Of course, these figures do not take into account the impact of COVID-19 lockdown measures on property sales.
Yet, the data shows that demand for real estate across the UK was resoundingly strong. And while some measures will make it more difficult to process further transactions in the immediate future, there is nothing to suggest that the buyer demand recorded in Q1 2020 will disappear.
It’s about time, not timing
Put simply, real estate is an attractive asset due to its capital appreciation.
In the 2000s, house prices increased by an impressive 117%. And even in the aftermath of the global financial crisis, residential real estate was able to recover and post a 33% increase in house prices during the 2010s, even amidst Brexit uncertainty and a string of elections.
These figures demonstrate that despite political and economic events, real estate is a resilient asset able to hold its value in the long-term and recover from volatile periods. This principle should give relief to property investors and homeowners. After all, even taking into account the current pandemic, Savills is anticipating house prices to rise by 15.3% over the next five years.
The point is clear. At this point in time, property owners and prospective buyers need to the look at the bigger picture and recognise the long-term capital growth on offer from bricks and mortar.
Paresh Raja, CEO, Market Financial Solutions