It goes without saying that 2020 was a volatile year full of twists and turns that caught businesses and investors alike off guard.
For all the challenges faced, the biggest concern had to do with the uncertainty the wider community faced. At the height of the first lockdown, there was no telling when or how the COVID-19 pandemic would come to an end. Naturally, this had plenty of people worried.
Now one month into 2021, it looks as though we could soon be entering a period of recovery. While we may be in a lockdown, the rollout of a vaccine suggests we could be witnessing the beginning of the end of the pandemic. In light of this, it makes sense to consider just what UK society will look once the pandemic subsides.
Of particular interest to many is the property market.
For example, the average price of a residential property experienced its highest level of growth witnessed since 2015 – finally putting an end to the four years of price stagnation as a result of Brexit uncertainty. In fact, during the opening three months of 2020, Rightmove recorded the greatest surge in Q1 house price growth since 2003. This is all the more impressive given such growth occurred amidst the pandemic.
As we look to the coming 12 months, the questions beckon – can the property market maintain the same levels of transaction activity and price growth witnessed? Or will new developments rock the figurative boat – potentially leading to a reversal of the gains seen last year?
A rocky start to the year
With the UK in its third lockdown following another wave of COVID-19 infections, it’s unlikely that January will see particularly impressive transactional activity figures. However, unlike the previous UK lockdowns, the British government is combating the virus with a complete roll-out of the Pfizer and AstraZeneca COVID-19 vaccines. what’s more, with people still able to move homes during this current lockdown, the market has by no means comes to a standstill.
Taking a long-term perspective, there’re plenty of good reasons to be optimistic about the property sector. In its 2021 property price forecast, Rightmove predicts positive house price growth of 4% over the course of the year.
The estate agents expect that any negative developments that would normally hinder property price growth will be outweighed by an increase in buyer demand from those who’ve been homebound for the majority of 2020. This is a perspective I also share.
Of course, there are still some issues that lie on the horizon. Mainstream lenders, throughout 2020, have struggled to reconcile their internal processes with the market uncertainty imbued by COVID-19. As a result, many have removed a large number of their mortgage products from their shelves, as well as tightening the criteria for successful loan applications.
This has led to numerous reports of increased mortgage application rejections; particularly for those purchasing their first property or who are only able to produce small deposits.
Here at Market Financial Solutions (MFS) we’ve experienced increased demand for our alternative loans from brokers and buyers needing fast and tailored finance solutions to complete on property transactions. Unless traditional lenders are able to adjust their practices to better fit the “new normal”, I can only expect this trend to continue.
Changes to SDLT
Most commentators are in agreement that the property market’s impressive performance last year was mainly due to the stamp duty land tax (SDLT) holiday, which allowed homebuyers to shave up to £15,000 off the stamp duty tax bill on any new property acquisition under £500,000.
Now that this holiday is due to end soon, specifically on 31 March 2021, property professionals are expecting a surge in demand in the run-up to this key date. For overseas buyers this is especially prescient as on 1 April, the 2% SDLT overseas-buyer surcharge will come into force. Prospective buyers will understandably be eager to ensure any property transaction is completed before these changes are made.
As we look to the coming year, I don’t expect that COVID-19 will deter investment into UK property. 2020 has shown us that investors, both domestically and abroad, are confident that British real estate can hold its value, and even post impressive gains, during times of severe market instability.
For alternative finance providers, it’s our responsibility to guarantee that our clients can access the funds needed to easily complete on their housing transactions. There is an opportunity here to play an integral part in the upcoming wave of investment into British real estate, one which MFS will be welcoming with open arms.