Coronavirus still weighs heavily on the minds of investors world-wide. One need only look to the constant volatility in the global markets recently to see that investor fears surrounding COVID-19 will be affecting financial decisions for months to come.
In the UK, it’s important to understand how these fears will affect the housing market. At the beginning of the year, the UK property industry was enjoying a huge rush in demand as Brexit uncertainty vanished in the wake of Boris Johnson’s election victory. Pent-up demand was finally able to be unleashed, spurring an increase in market activity – which subsequently resulted in general house price growth.
Of course, as mentioned, fears surrounding COVID-19 brought the majority of transactions to a standstill. This worry, coupled with the difficulties of selling a property whilst adhering to social distancing guidelines, meant that market activity dramatically dropped and the property price growth seen at the beginning of the year turned into house price decline.
But has this sullied property in the minds of UK investors forever? Or does it represent a momentarily blip that will be rectified by a rush as soon as investors feel confident once again, as they did at the beginning of the year?
To find out, FJP Investment recently surveyed 850 investors to see if their attitudes towards property had changed recently, and to uncover how COVID-19 had affected their financial decision making more generally.
Safe, not sorry
For us in the property industry, FJP Investment’s main finding represents some much-needed good news. 48% of the investors surveyed said that they still view property as a safe and secure asset amidst the global pandemic – as opposed to just 12% who disagreed.
This, on its own, would suggest that property should be enjoying a boom in demand during the coronavirus pandemic. If a global pandemic isn’t reason enough to try and secure your wealth via safer assets, then what is?
The issue, in actuality, is fear of the unknown. 43% of surveyed investors said that they were actively holding off on making any large financial decisions until they deem the global coronavirus outbreak to be over.
With so much uncertainty in the air, hesitancy like this is not an unreasonable reaction. The completely unprecedented nature of the current pandemic has meant that everyone has struggled to properly quantify risk. As such, a worst-case scenario is never completely off the cards, and investors have been wary of this since the beginning of lockdown.
However, it is increasingly likely such a scenario, for the property sector at least, is unlikely. In fact, it could be the case that the majority of COVID-19’s adverse effects may have already been inflicted. Halifax’s recent House Price Index (HPI) revealed that the rate of negative house price growth was already slowing down in the UK, and that prices are currently still up 2.6% from May 2019.
This slowdown in the virus’s economic ill effects were not a sure thing at the beginning of the year, however. As such, one-in-five (20%) investors admitted holding back on a property purchase in 2020 due to COVID-19.
Such transactions were not cast by the wayside, however, as I believe such investors will follow through on their intentions once the pandemic is over. I cannot say for certain that a second spike or virus mutation won’t happen, but as it currently stands, I am optimistic that we’ll see a virus in retreat and a market in renewal soon enough.
Jamie Johnson is the CEO and Co-founder of FJP Investment, an introducer of UK and overseas property-based investments to a global audience of high net-worth and sophisticated investors, institutions as well as family offices. Founded in 2013, the business also partners with developers in order to provide them with a readily accessible source of funding for their development projects.
Jamie Johnson is the CEO of FJP Investment