It is looking likely that the upsurge in Covid-19 infections will see increasing restrictions imposed on individuals and businesses in the UK over the coming months into winter.
In this week’s blog, we discuss the possible impact on the UK property prices if further restrictions, and even a short-term lockdown, are progressed.
Office and Retail Market
- A further lockdown will lead to the postponement of a return to the normal office and commercial life.
- Those considering renting new office space will put off again. This could easily push the commercial property market, especially offices, into long-term decline.
- Widespread store closures may be imminent as larger brands have shut shop and retreated online.
- The peripheral market that relies on office and retail, such as cafes and passing trade, will also be hit.
- It is hard to predict the long-term impact on the commercial sector. However, recovery is likely to be swift when it comes, especially if the arrival of an effective vaccine is within reach, bringing a longer term market confidence. At that moment, there is likely to be a market rebound. Therefore, in spite of further restrictions, those with a longer-term perspective may well regard this as a unique opportunity.
- Interest rates are still relatively low, however, with investors getting used to the ‘new normal’, a further investment may lead to opportunistic investors taking advantage of low borrowing costs and earning higher profits.
- The ending of the furlough scheme will very likely lead to higher unemployment and as a result decrease consumer confidence. However, it is argued that this has already been anticipated and reflected by the market.
- A second lockdown will cause a slow-down in transactions, similar to the first, with residential transactions paused, face-to-face interactions severely restricted, and a tightening of property prices.
- Combined with the stamp duty holiday, which has given the market a short term boost, we could see prices rise, then fall again once stamp duty is reimposed, and the furlough scheme ends.
- The second lockdown may provide more time to assess purchaser requirements and view properties (online).
- A second lockdown may also encourage individuals to search for properties with more room to work from home, and outdoor space. This may change the shape of the property market, decreasing city activity, and increasing transactions in the country.
- Construction came back earlier than other sectors after the 1st lockdown, showing its importance to the UK economy. Opportunists may be able to take advantage of this.
- The aftermath of the first lockdown, as reiterated in our Property News 2020 blog, demonstrated the market’s ability to rebound. A build-up of demand will support a quick recovery.
- Those seeking to invest in, or buy a new property, may well see a second lockdown as an opportunity to get more for their money.
- The government is highly supportive of the housing market and is unlikely to standby as the market stagnates, whether through support for the construction of new homes or through a continuing Stamp Duty holiday. This again could encourage investors. Moreover, persistently low mortgage rates could create a more affordable environment.
Like recessions, no two lockdowns are the same. Although there are bound to be some effects on stock markets and consumer’s confidence in general, people are better informed and far more prepared then they were in the first lockdown back in March.
Furthermore, the hope and prospect of a vaccine could transform sentiment at a stroke. A second lockdown, therefore, could be seen as an opportunity to invest in property which is, after all, long-term investment and will outlive the current crisis.