Property has always been a sought-after investment asset, with its ability to diversify a portfolio and provide buyers with a passive income. While property can be used to balance an existing portfolio, this single asset type can also deliver exceptional diversification; from the property type itself – such as houses or apartments – to the potential of different locations around the country. This means investors can build a more secure and tangible portfolio without the demands of regulating several different assets.
We have seen the property market endure many challenges over the years, from the financial crash, to national housing shortages and Brexit. But with the global pandemic inevitably changing the way we live our lives in the coming years, will property remain a reliable investment asset in 2021 and beyond?
After national lockdowns and stringent tier systems, the majority of the UK have been required to transform their living arrangements to adapt to a new way of working – from home. Crowded office spaces are, for now, a thing of the past, and home offices have become a necessity for many. And with more time to browse online listings, the property market has reaped the benefits of these changing demands.
In summer 2020, moving to more spacious properties to achieve a healthier work/life balance correlated with the alleged decrease in city living, in which the tall towers of city centres (notably London) were replaced by greener environments in suburban areas. Properties with gardens and outdoor spaces soared during the post-lockdown boom, as local guidelines and travel restrictions continued.
The drastic changes in demands that we saw in 2020 have not only sustained the property market over the past 12 months, but with a third national lockdown, these priorities continue to steer buyers towards more spacious apartments and houses. This makes 2021 an opportune time to diversify your investment portfolio with property, especially with commuter towns and regional cities offering better value for money when compared to the capital.
While Covid has encouraged an ongoing rise in demand across the property market, it has caused a simultaneous lag in supply.
Society’s changing priorities coincided with the onset of the Stamp Duty holiday in summer 2020, with this prime opportunity to buy/move encouraging more than one million sales according to Savills. With the Stamp Duty holiday deadline approaching and more sales completing, this has continued to drive the average UK property price. Currently sitting at over £325k, the property market has hit record heights for five consecutive months.
Similarly, national lockdowns and social distancing guidelines have reduced the capacity of workers across many building sites, which in turn, has led to a significant slow down in supply of new properties.
With just 5,000 new homes delivered in 2020 and the rebound of the construction industry heavily dependent on the economy’s recovery, it’s expected to take years for this supply and demand to stabilise back to pre-Covid levels, which still presented a huge disparity in the first place. When we consider the benefits of the Stamp Duty holiday with this surge in demand, it presents an ideal opportunity to enter the property market while it’s in an upward trajectory.
2020 saw the UK enter its first recession since the 2008 financial crisis, closely followed by dwindling interest rates in the second half of the year. Falling to just 0.1%, the UK reached its lowest interest rate in the Bank of England’s 325-year history.
The government’s efforts to encourage consumer borrowing and spending continue to benefit prospective buyers and investors, while mortgages become more accessible as lender confidence grows. When combined with the free-trade deal emerging from Brexit negotiations, this has provided buyers with the reassurance and confidence to take the plunge into the property market.
With these low interest rates balancing out the increasing prices we are seeing, we expect the property market to remain strong, regardless of national lockdowns and Covid restrictions. Considering the property market’s ability to overcome the wider effects of the global pandemic, the reliability of UK property as an investment asset continues to be proven.
There’s no doubt that by thriving during a global pandemic, the property market has demonstrated its ability to adapt to unprecedented circumstances and challenging landscapes. While the same can’t be said for the economy, we expect the Covid vaccines will support rebounding growth in 2021.
Similarly, both interest rates and supply will likely remain low, supporting rising activity in the market throughout the new year. According to the latest UK investment guide from SevenCapital, this extended release of ‘pent-up demand’ will highlight opportunities for homebuyers and investors alike, driving property prices and rental prices to new levels in popular, key regional areas.
* The opinions expressed by the guest writer above are theirs alone, and do not necessarily reflect the opinions of Housebuyers4u. Housebuyers4u is not responsible for the accuracy of any of the information supplied by the guest writer.