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Post-Pandemic Property - A Glimpse Into The Future Of The UK Housing Market

Updated: Sep 21, 2020

Post Pandemic Property

We’ve seen the UK property market rise and fall over the years due to a variety of factors (nobody mention the ‘B’ word, please). However, the last four months have brought about a sequence of events so unprecedented that their effect on the housing market has been jarring - to put it mildly.

During the UK lockdown, the market experienced a staggering eight-week closure, during which time predictions around its future were understandably grim against a backdrop of possible mass unemployment. When it cautiously reopened, prices had plummeted as panic-sellers looked to cash out on their properties.

This resulted in banks pulling high LTV mortgage rates due to the economic uncertainty of furlough, among other reasons. As a result, many first-time buyers and those with lower deposits were pushed firmly back out of what was essentially a fantastic opportunity to get on the property ladder’s first rungs.

However, the future isn’t as bleak as it seems!

Running the numbers

A forecast by an acclaimed global consultancy predicted in April that UK property transactions would fall by up to 15% this year, in comparison to 2019. However, data since then has somewhat defied this forecast.

Housing markets operate the same as any other trade: on a supply-demand basis. People will always need a roof over their heads, regardless of the global climate. And when it comes to countries with limited development space like the UK, demand will always outweigh supply.

In other words: pandemic or no pandemic, there will always be a need for housing in the UK!

Case in point: August showed a notable rise in property transaction. In fact, this growth spike was big enough to alter previous predictions for the immediate future of the housing market.

Nationwide, one of the UK’s most popular mortgage providers for first-time buyers, announced that at the close of August, monthly house prices had not only grown - they’d reached a 16-year high! This was preceded by a Bank of England report showing mortgage approval data was also back on its way up.

To top off a great month in terms of UK property market recovery, exchange numbers outside London were the highest they have been for a decade!

Regional Performance

Global property supplier Savills publishes an annual five-year prediction for the housing market. While its original forecast was published in November 2019, it has brought out an adjusted prediction due to the coronavirus pandemic.

Initially, there will be an across-the-board drop in house prices. However, as the market starts bouncing back, Savills have noted that the recovery process might not be totally uniform - meaning certain regions are likely to perform higher than others!

Here’s a quote from the report:

“At this stage in the housing market cycle, we would normally expect the Midlands, north, Wales and Scotland to perform strongest, with slower growth in London and the south where values rose faster in the decade preceding the EU referendum. Covid has the potential to change that dynamic in the short term.”

“Different employment sectors have faced different challenges during the lockdown. For some sectors, such as professional, scientific & technology, the impact is relatively mild, with many employees able to work from home. For others, such as accommodation & food service, remote work is not usually an option. Housing markets will recover fastest in regions with more jobs in more resilient employment sectors.”

This tells us that, while London and the south-east will be some of the front-runners in the recovery of the housing market, the north-west also holds its own. Having experienced less of a drastic fall than its fellow regions, its pole position looks set to remain until 2024.

This means that the north-west is the only region with a predicted growth forecast that has not been altered due to the coronavirus pandemic! House prices are set to rise by 24.1% over the next five years. Hot on the north-west’s heels are Yorkshire and the Humber (with an increase of 21.1%), Scotland (20.1%) and the north-east (19.9%).

Economic Growth

Economic Growth

When examining deciding factors that contribute to the UK property market’s recovery, economy bounce-back tops the list!

Savill’s report touches on this. It mentions that GDP will likely plummet 8.3% in 2020 - although it is set to regain this ground in 2021.

Interest rates are also important to keep in mind, especially considering how vastly they affect mortgage offers and buyer savings! Unfortunately, The Bank of England base rate stands at an all-time low of 0.1% - and this may not change until as late as 2022.

On the plus side, overall household income looks set to rise!

Many companies have made the switch to working from home. This equals savings in terms of commutes, childcare etc. Businesses are reopening, employees are returning from furlough (which means an instant wage increase of at least 20% compared to the furlough pay rate of 80%), and those who have left the job market may now be actively seeking employment, transforming single-income households and increasing family spending budgets.

So while the present state of the UK housing market might seem foggy and uncertain, hang in there.

Better days are coming - in fact, they’re already here!

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