The true level of economic devastation caused by the pandemic is as yet unknown. Given the best outcome, that the virus is brought under control by vaccination, restarting the economy will not be like switching a light back on.
The latest report from Home.co.uk suggests that, for the time being, the UK property market remains in good shape but with dark clouds of uncertainty looming over both the sales and rental sectors for the year ahead.
Many businesses (and livelihoods) will simply be gone forever and it will take time for those businesses that remain to return to profitability. Moreover, forbearance on the part of mortgage lenders is likely to be limited in the absence of further government intervention. Precisely how many homeowners will be forced to sell in 2021 due to job losses and business failure is as yet unknown.
The warning signs are already apparent. Rent arrears are on the rise, with more than half of UK landlords surveyed by the National Residential Landlords Association having lost income due to the pandemic. This is clearly not a sustainable situation.
However, despite the extraordinary events of 2020 the UK property market remains on a firm footing overall as we commence the new year.
Home prices are up 4.9% overall and the market is showing significant momentum. Neither Brexit fears nor COVID has managed to topple this vital part of the economy, although the measures enforced to contain the pandemic have radically changed the nature of supply and demand.
So far, the London exodus has not pushed down prices significantly, save for some more central locations. Growth remains at 3.0% year-on-year overall for the Greater London region and this is remarkable in itself given current events. Looking forward to how 2021 will play out, we see an opportunity for further scarcity-driven price growth in the regions and a period of readjustment for the capital.
Reports that mortgage approvals have reached a 13-year high, together with the COVID vaccine rollout, is welcome news and buoys confidence in the property market and the wider economy. The announcement of grant aid for the hospitality businesses of the UK will also be well received given the new and potentially lengthy lockdown.
However, it is unrealistic to think that the UK property market will not be affected by the worst economic downturn in 300 years.