After months of strict lockdown measures and the success of the UK’s vaccine rollout to date, society as a whole is beginning to open up once again. Many industries are reporting a notable rise in activity as a result, with the property sector particularly buoyant.
House prices are rising sharply – online property portal Rightmove has reported that the average asking price jumped by 2.1% in April to a new all-time high of £327,797, an increase of £6,733 from March. The stamp duty holiday clearly continues to galvanise buyers, triggering a surge in demand that far outstrips demand.
Meanwhile, construction activity has also experienced a sharp uptick at the start of the year. In March 2021, the construction sector expanded at its fastest pace for more than six years, with increased activity recorded in housebuilding, commercial and civil engineering, according to the IHS Markit/Cips UK construction purchasing managers’ index.
Here, three experts from across the property industry offer their perspectives on the interesting trends that are shaping the market at present:
Beware of the bottleneck – Paresh Raja, CEO, Market Financial Solutions
The stamp duty holiday ends on 30 June. As this deadline approaches, thousands of buyers will be trying to complete on deals, ensuring they do not miss out on the tax break, which can save them as much as £15,000. Unfortunately, a bottleneck is forming (just as it was before the Chancellor extended the initiative by three months) and many will miss the deadline.
According to recent analysis, the total time it currently takes to sell a property – from initial listing to completion – sits at an average of 295 days (ten months). The stamp duty holiday is actually exacerbating the problem, with many lenders and legal firms struggling to meet the huge surge in demand there has been from prospective buyers.
At Market Financial Solutions, one of the standout trends throughout the pandemic has been the high number property buyers being let down by lenders. I expect this problem to become more pronounced in the coming weeks as buyers rush to press ahead with a purchase.
We are also seeing a rise in demand for development exit bridging products. In short, developers are also struggling to sell their properties in a timely manner due to the bottleneck of transactions that is taking shape – as a result, they required a short-term loan to repay their existing development finance facility within the agreed timeframe while still awaiting the sale to be completed. Again, this is a trend that looks set to continue for much of 2021.
The dangers of predicting the ‘new normal’ – Alpa Bhakta, CEO, Butterfield Mortgages Limited
The ‘new normal’ is a phrase that has entered our everyday lexicon during the pandemic. In the property industry, many commentators have been making bold predictions about the ‘new normal’ will look like once the threat from Covid-19 subsides; for me, however, this is dangerous.
For instance, much has been written about the exodus of homebuyers from urban to rural areas over the past 12 months. This is understandable – with remote working becoming the norm for many organisations, and socialising far more restricted, the appeal of living in urban areas will have declined, with many buyers keen to access more spacious properties and greener surroundings instead.
However, to take short-term trends that have taken hold in the unique climate of a pandemic and asserting that they will continue once it has passed is problematic.
Exactly how will local high streets look in 12 months’ time? What balances will organisations strike between office and remote working? Will homebuyer demand for rural properties remain as high when cities spark back into life? And how will the property market as a whole respond when the stamp duty holiday expires on 30 June?
No one knows the answers to these questions with any great certainty. And given predictions about the state of the property market rely on a combination of these outcomes, one can quickly see why any such forecasts must be taken with a hefty pinch of salt.
At Butterfield Mortgages, rather than looking too far ahead, we are focused on remaining responsive to the demands of clients and movements within the prime central London market. For us, a diligent approach based on tangible factors remains of utmost importance – of course we monitor market trends with interest, but we are also careful not to make assertions on what a “new normal” will look like while still in the midst of the pandemic.
Construction sector needs more support – Jamie Johnson, CEO, FJP Investment
The construction sector is booming. The rise in activity is primarily the result of the multiple lockdowns enforced across the UK over the last 13 months, which has caused a backlog of projects that are now springing back into life.
Another important factor is the rise in renovation and refurbishment works, across both residential and commercial properties. Confined to their own homes, residential property owners have been eager to increase the space they have by commissioning extensions and loft conversions. In fact, a survey of 2,000 UK homeowners by Checkatrade found that they spent an average of £2,608 on property improvements in 2020; this is 15% more than in 2019.
A similar trend can be seen in the commercial real estate space – although naturally the changes and reasoning behind them are very different. Office owners, for instance, have been undertaking work to better enable social distancing and ensure the necessary health and safety measures are installed. Meanwhile, hospitality venues have been undertaking works to maximise any outside space they have access to, meaning they can welcome back as many customers as possible in the months to come.
However, the picture is not all positive. At the end of January 2021, a survey of 3,568 construction firms by the Office for National Statistics found that one in eight had low or no confidence that they would survive until the end of April. Uncertainty due to the pandemic was a major, but so too were the cost of materials, labour shortages, and access to finance.
In the months to come, if the surge in construction sector activity is to be sustained, all these issues must be addressed. And funding is critical – both the private and public sectors must work together to ensure adequate capital is available for developers and housebuilders to effectively take on and complete new projects.