What will property investment look like after Covid-19?
With the UK’s herculean Covid-19 vaccination programme underway, it appears that the nightmare of future potential lockdowns may finally be coming to end. However, both existing and potential property investors are already asking “what will property investment after Covid-19 really be like?”
In this article, we’re going to explore how the property market is likely to be affected in a post-pandemic world, and how this impacts upon investors. Will continued uncertainty affect the industry, or are more measured outcomes likely? Read on to find out.
Covid-19 and real estate investment: has Brexit also played a role?
Even before we take the pandemic into account, it’s fair to say that the UK has faced its share of uncertainty over the past five years. Brexit, and the ensuing 2019 general election, in particular, caused many to consider the strength of property investment.
After the UK/EU withdrawal agreement however, the Brexit-related uncertainty over the property market and wider economy was lifted. Wen Covid-19 arrived, with plunging GDP and stock market, it became clear that the pandemic was now the new uncertainty looming over the property market.
The impact of Covid-19 on investment property: is there uncertainty around property prices?
Perhaps one of the positives of property investment is that prices tend to remain robust or even thrive during times of uncertainty. To understand how the UK property market has been affected by Covid-19, we need to take a step back to the beginning of the first lockdown, back in March 2020.
Few of us will be able to forget when Boris instructed the entire nation to stay at home in an attempt to tackle the exponential rise in Covid-19 cases. As a result, many businesses were forced to close, with others having to adjust to a “work from home” model.
During this period, a temporary freeze on property viewings meant that the UK property market reached a stalemate. National estate agents reported a drop in demand of 40% by the end of the first month of lockdown.
However, by April, property prices had witnessed a 2.4% year-on-year growth. Fast-forward to July 2020, when chancellor Rishi Sunak had introduced a stamp duty holiday on property purchases, and you’ll have witnessed a huge demand among investors looking to take advantage of the tax savings on offer.
This trend continued throughout 2020, with house price growth measuring nearly 6% by October of that year. If current market predictions are to be believed, UK investors can expect to witness growth of just over 21% by 2025, with properties in the North West seeing the highest increase in prices.
What will happen to the rental market after the Covid-19 pandemic?
With millions of workers adjusting to lockdown life, the rental market witnessed something of an unprecedented kickstart. During 2020, many renters sought accommodation that was better suited to the work-from-home lifestyle, resulting in a boost in demand for houses, flats and apartments with balconies, spacious rooms large enough to accommodate an office desk, shared gardens/terraces, and high-speed fibre broadband to facilitate flawless remote working.
At present, the UK is continuing on its roadmap out of the pandemic. While almost all sectors have now reopened, it looks like the work from home model is here to stay for many, which means this current demand for more spacious rental properties is unlikely to wane anytime soon.
Unsurprisingly, the rental boom has encouraged buy-to-let investors with rising rental yields. Post-pandemic, the work-from-home culture shift may continue to allow people to work more effectively outside of their office bases in large cities like London and Birmingham.
Property investment after Covid-19: has there been a polarisation of sectors?
Perhaps the largest impact of Covid-19 on investment property has been the polarisation between sectors. Leisure, hospitality and retail, for example, have all suffered significant declines in transactional volume and value. Cash flow has been disrupted, and the shift to online delivery models for retail, in particular, has highlighted that perhaps the UK has too much retail space - given that in recent pre-pandemic years, high streets up and down the country had already witnessed retail space being repurposed for housing.
While the retail sector could present itself as a viable investment opportunity in the future, uncertainty across the industry means that when it comes to Covid-19 and real estate investment, it’s perhaps best to avoid retail property for now.
Is it a good idea to buy investment property after the Covid-19 pandemic?
The beauty of property investments is that they have an uncanny ability to weather the storm of economic uncertainty - as the growth in house prices during the coronavirus pandemic already proved. For those who know where to look, there’s no time like the present to find valuable investments in the property market.
As always, there are opportunities for savvy investors - both now, and over the next few years. Whether you hold an extensive existing property portfolio or are interested in becoming a first-time buy-to-let investor, PropertyData can provide you with the tools you need at your fingertips to make smart investment decisions.