Whatever approach you take, the UK’s recovery from the coronavirus pandemic will be a marathon – not a sprint. Newly introduced social distancing measures, implemented just as the government has been attempting to facilitate a post-pandemic economic recovery, shows us just how challenging this task really is.
This should not distract us, though, from the recent remarkable resurgence in activity witnessed across different sectors of the economy. The property market, especially, has posted record house price growth in recent months; and this can be attributed to the introduction of the stamp duty land tax holiday.
This tax break has been positively received by both international and domestic buyers. In the first month following the policy’s introduction, listing site Rightmove reported a 75% jump in buyer enquires; and August’s Halifax house price index recorded UK house prices rising 5.2% year-on-year.
It also shows, in my own opinion, that demand for property was accruing throughout the entirety of lockdown. Some property specialists feared that, during the height of lockdown, those who were originally intending on moving property were now put off the idea entirely due to the uncertainty associated with COVID-19. What the figures above tell us though is that this demand did not disappear. In reality, the introduction of the SDLT holiday provided the incentive needed for buyers to return to the market once again.
The question now, though, is whether this level of demand can be sustained. As COVID-19 case numbers rise, will potential buyers retreat from the market again, placing the chance of a full UK property market recovery at risk? Or will government measures be able to successfully maintain the current level of market activity until the end of the SDLT holiday?
To help address these questions, FJP Investment recently surveyed over 900 UK-based investors with asset portfolios in excess of £10,000, excluding their residential property and workplace pensions, to see how they felt about the UK’s ability to handle COVID-19. I analyse some of the key findings below.
Bearish on COVID but bullish on property
Of those who took part in the FJP survey, 24% of investors said they are planning on purchasing one or more properties in order to capitalise on the SDLT holiday. This figure rises to 43% for those aged between 18 to 34.
This bodes well for the British real estate market. Given that the SDLT holiday is currently due to continue until March 31st, 2021, we can expect these prospective buyers to be eagerly seeking to finalise transactions before this key date. The long-term forecast for British property, then, looks positive. But is there still more that can be done to help out the property market?
According to the FJP Investment research, 43% of investors said that the government should be offering more incentives to encourage investment into property. Approximately half (54%) believe that the mortgage holiday relief scheme should be continued past its current deadline of October 31st, 2020. On top of this, a majority (57%) think that more financial relief should be offered specifically for companies that have experienced extended COVID-related disruption to their business operations.
If the government recognises this sentiment among investors and acts accordingly, maintaining the incentives already present in the market, then there is a good reason to be optimistic about the future.
The future outlook
Experienced property firms like Savills are still optimistic about UK property price growth over the next five years, with valid reasoning. Regardless of the impact COVID-19 is having on society, pragmatic buyers and sellers will always be keen to pursue time-limited deals, of which the SDLT holiday is definitely one. As such, they will surely remain committed to any planned real estate purchase for the remainder of the SDLT holiday.
I, personally, am hopeful that the UK government will regain its reputation for competence and good governance, successfully tackling the COVID-19 pandemic and properly incentivising investment back into UK real estate. That is why I believe both domestic and international investors are likely to continue investing in UK property in the coming months.
Jamie Johnson is the CEO 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