The London property market is important to the UK property market as a whole. When it booms it tends to lift growth in other regions and we see requests for property insurance quotes rise and when it slows so we see the reverse happening. So, what does 2020 hold for the capital’s housing market? Well despite the Coronavirus, there does seem room for optimism.
The London housing market got off to a great start in 2020, building up momentum following the general election in December 2019. This year was even considered the property market’s strongest start to a year since prior to the Brexit referendum in June 2016.
For March 2020, the House Price Index by Rightmove showed the average asking price in London came to £638,826, which is a 1.6 per cent rise from February and a 5.1 per cent increase year-on-year. As the biggest annual rise since May 2016, this growth is likely related to demand in the capital still outweighing supply.
Additionally, the number of transactions has increased in London as the number of sales agreed rose by 34.4 per cent. On top of that, properties were selling more quickly as it took 15 fewer days for houses to sell once they were on the market, showing the market was moving quickly.
The housing market is expected to slow down but not stop
As the government has encouraged buyers and sellers to delay transactions and tenants to wait to move house, the housing market will naturally slow down. Fewer properties are expected to be put on the market as in-person property viewings aren’t allowed during the lockdown.
London estate agents have seen a drop in enquiries over the past couple of weeks. However, as the property market has shown its resilience in recent years, it’s still doing so as many buyers and sellers are continuing with planned purchases despite coronavirus worries.
To further help keep the market moving, many estate agents are adapting by offering virtual tours of properties. And with more people spending time at home, property portals are seeing a rise in search numbers, similar to those often seen on Christmas and Boxing Day. We’re also seeing a large number of private landlords rushing to secure long-term tenants, with many doing so on their own, through using affordable online letting agent services to advertise on Rightmove and Zoopla. If you’re a landlord going alone without an agent, in these tough times it’s even more important that you protect your rental investment with landlord insurance. You can find out more about our insurance here.
Ultimately, technology is allowing the market to continue moving and will likely become a bigger part of the sector even after the lockdown is over.
Growth expected to return to the market
Because of the coronavirus crisis and UK lockdown, property prices and rental growth is expected to slow down, but many property professionals are predicting the market will bounce back following a period of uncertainty once the crisis is over.
There is a long-term correlation between income growth and rental value growth. In the short-term, growth in rental value is expected to slow down throughout the next year. As income growth returns after the economy and different sectors recover from the coronavirus pandemic, growth is expected to accelerate in the rental market – which is good news for all our landlords.
Additionally, with there still being a shortage of housing in London, demand is expected to return once the coronavirus crisis ends. In the capital, supply has not been able to keep up with demand, which is expected to continue to be the case, especially as some construction sites for residential developments have temporarily closed.
As Chancellor Rishi Sunak announced in the UK Budget that overseas investors will be required to pay an additional 2% on Stamp Duty Land Tax starting on 1 April 2021, this will also likely push overseas buyers to invest in UK property, especially in the prime London market, during the next 12 months. This could help spark demand and growth in the capital.
Historically low interest and mortgage rates could tempt buyers
As the Bank of England’s base interest rate has been lowered to 0.1 per cent, the lowest the rate has ever been, many people might take the opportunity to borrow to lock in these historically low interest rates. In the medium-term these low rates are also expected to help the market return to stronger levels of property price growth once the lockdown is over.
If you still have a stable income through the coronavirus crisis and have the capital to put down a 25% deposit, it could prove to be an affordable time to get a mortgage with borrowing being cheaper than it’s ever been.
Help is available for landlords, homeowners and tenants
As many Britons are living without work or pay and could be for several months, measures have been put in place by the government in hopes to ease the financial stress many are facing. For homeowners and landlords impacted by coronavirus, banks have agreed to offer mortgage payment holidays for up to three months.
The government has also announced the Coronavirus Act, a ban on rental evictions for the next three months in England. This means that landlords can’t evict tenants who can’t pay their rent due to coronavirus impacting their income.
As the government has announced a wide range of support for the economy, businesses and individuals, the impact of coronavirus should be reduced, allowing the economy to recover quicker. This could in turn help the housing market bounce back more swiftly.
Like Some More Help?
If you’re considering selling or letting out your property, need to get a valuation for insurance purposes or you’re just curious, and would like an instant, up-to-date sales or rental valuation of your property using Portico’s property valuation tool.
If you need protection for your home or rental investment, we can help you find the best cover at a highly competitive rate. Give the Coversure Poole team a call on 01202 801 782 to find out more.