Hope for some, mourning for others as home prices rise Capital

YoHome prices in the K region have hit a record high since the lockdown was lifted, following the fastest monthly growth in property values ​​in August since 2004, buoyed by the issuance of pent-up demand and the government’s cut in stamp duty.

Although Britain slid into the deepest recession in recent history in the second quarter, real estate agents reported an increase in interest from those with financial relocation guarantee, and from those whose priorities had changed due to Covid-19. However, there are winners and losers in this fast-moving market, as Covid-19 creates a period of boom and bust.

Losers

First time buyers
For the first time, buyers suffered a double whammy after the chancellor, Rishi Sunak, launched the stamp duty holiday through March next year. The change has brought about a price boom pushing real estate values ​​out of the reach of newbies, and the change has also removed a first-time advantage over other home hunters. Not many young buyers outside London were paying this tax to get to the real estate ladder, thanks to the exemption from stamp duty for first-time buyers. Now they face stiff competition from relocation companies and second property buyers to make money from the stamp duty holiday.

Major British banks have also stopped offering high-value mortgage loans in order to protect themselves from any sharp drop in home prices, and this disproportionately affects first-time buyers, who usually have smaller deposits.

But even if the Covid recession brings prices down, there is unlikely to be a positive side for first-time buyers, according to research firm Resolutions.

While prices have rebounded in recent months, the government economy’s Office of Budget Responsibility (OBR) estimates that property values ​​may fall by 21% by the third quarter of 2021 as the pandemic spikes unemployment and forces people to sell their homes. Or postpone new purchases. But the weak income growth of young people as a result of the economic downturn will prevent them from benefiting from it.

Commercial real estate
With city centers remaining largely empty, commercial property owners are under increasing pressure. Retailers, café and restaurant chains are closing hundreds of outlets and cutting thousands of jobs, as the main streets adapt to fewer people who travel to city centers for work.

Although the government is encouraging a wider return to offices to protect companies that rely on city workers, turnout in central London remains two-thirds below the usual level as companies delay the return of employees to crowded office areas.

Early in the pandemic, CEOs of Barclays and the advertising giant WPP predicted the end of busy downtown offices and rush hours, and flexible work became the norm: “I think the idea of ​​putting 7,000 people in a building might be a thing of the past,” Barclays CEO, Jess said. Staley, at the time.

The consulting firm Capital Economics believes that telework, high unemployment rates, and store closures will cause huge losses to commercial property owners. He warns that investors should expect returns to drop 20% by 2025, with job creation levels rising to at least 2030.

With up to 31 million international visits expected this year – at an estimated cost to the UK economy of £ 24 billion – hotels have also come under significant pressure. Universities are planning to drastically reduce the numbers of international students this year, resulting in an indirect effect on student property owners.

However, some experts expect a gradual return to business as usual. “After 9/11, commentators were saying people never wanted to work in the towers again,” said Matt Oakley of Savills real estate agent. “After six months, things are back to normal. I don’t want to say there will be no change. Most people hate mobility, and if they get the chance not to do it every day, it will take it. Obviously, the disaster scenario for the real estate industry is that everyone works.” At home forever, but I can’t expect that to happen. “

The winners

Homeowners are looking to sell
With fewer people moving and more people working from home, demand has risen for larger homes, which have outdoor space, and are far from city centers.

Sales on Zoopla’s real estate platform are up 76% compared to the past five years, driven by pent-up demand and people rethinking their plans. Savills says the notable beneficiaries are places like Winchester and St Albans – London’s classic resettlement markets.

There has also been a rush among wealthier buyers of second properties in rural and coastal areas, given the potential long-term impact of Covid on international travel. The South Hams of Devon, the Isle of Wight, and the Lake District have seen high demand.

Lucian Cook, also of Savills, said that three-quarters of people in a customer survey said working from home made them reconsider their work-life balance. “A lot of people decide now that the time has come to take this step a little bigger than they usually would,” he said.

Home builders
The stamp duty cut and the small boom in the real estate market had a domino effect that goes far beyond homebuyers and sellers. Home builders are set to benefit from increased demand and higher prices: share prices of some of Britain’s largest construction companies have risen in recent months.

Prosperity is also spreading to benefit merchants, consultants, real estate agents, and attorneys, as well as companies closely associated with activity in the real estate market – such as craft stores, home and electrical stores, and furniture makers.

Residential real estate construction has led to a broader construction industry boom, which is nearing its highest level in five years, according to IHS Markit / Chartered Institute of Purchasing and Supply. However, experts warn that activity is likely to start to falter when pent-up demand is met and unemployment begins to rise.

“With the dismantling of government subsidies, occupying demand in all real estate sectors is likely to be affected. This will further weaken values, and developers are likely to delay existing projects and reluctance to start new ones,” said Hansen Low of Capital Economics.