Experts agree investing in real estate is still an excellent choice in the UK and abroad
The first quarter of 2020 was a difficult time for the real estate market while would-be investors sat idle and became over-familiar with the inside of their own homes. Nevertheless, there are already promising signs of a restart in the sector. Although transactions are carried out at slower speeds, buyers are finding clever, technology-driven, ways to continue researching, viewing and even completing key tasks.
Virtual property viewings, remote paperwork and digitised conveyancing
The traditional practicalities of buying and selling properties in-person have clearly stalled. Fortunately, many of these issues are being resolved thanks to the raft of technology solutions available. Virtual viewings were an option pre-coronavirus (although not a preferred one). However, they have of late become more popular than ever. Listing service provider OneDome Group even expects the growth in popularity to remain after lockdown.
Readily adopting new methods clearly shows the deep commitment among buyers and sellers to push their agenda and keep the housing market functioning. Indeed, estate agents and investment companies can now remotely complete the majority of paperwork. Where conveyancing is concerned, COVID-19 may be the much-needed catalyst the industry needs for digitisation of processes. Those who actively search and engage parties during lockdown will undoubtedly be in a strong position when the first semblance of normalcy arrives.
Hannah Akroyd, Managing Director at Prime Central London (PCL) agency Aykroyd and Co, gives insight into the current situation: “We are always under extreme time pressure to get deals done for our clients to avoid losing out to a competing buyer. Whilst transactions have largely stopped for the moment, we have been retained by several clients during lockdown who wish to ensure they are firmly ahead of the curve once the situation eases.”
Ms Akroyd advises sellers: “Rather than feeling stuck or helpless, this time can be used fruitfully by buyers and sellers to get their ducks in a row.” She also adds that buyers who have a “strong sense of the market” should take steps now to search online, retain a solicitor and initiate the mortgage process. If they do, they will likely be three to four weeks ahead when lockdown restrictions are lifted.
Ms Aykroyd concludes: “Indeed, we have currently been submitting blind cash offers on behalf of key investors we have worked with previously and are negotiating firmly to secure an excellent deal for them.”
One area that has been of particular concern of late has been borrowing yet this too is showing signs of reopening. Initially, mortgage lenders removed products and restricted their capacity. However, products are once again becoming available for borrowers through digitised processes such as online mortgage valuations. For those keen to secure borrowing, there are plenty of options now available.
Real estate demand high in Northern England
At the end of last month, housebuilders had fortunately begun the process of reopening of construction sites across the UK as the sector gradually returns to work. However, the polarised nature of the UK housing market is apparent even during the return to normal practices.
Locations with higher than average house prices — including Cambridge, Edinburgh and Southampton — are showing comparatively lower demand. This low demand stands in contrast to several northern cities that are showing higher than average demand, according to Zoopla’s UK Cities House Price Index. The locations displaying high buyer demand include the northern cities of Manchester, Liverpool and Leeds.
The cities regaining buyer demand have seen the greatest average price rises. Between March 2019 and March 2020, Nottingham experienced a 4.1 per cent house price: the highest in the country. The city was followed by Leicester (3.9 per cent), Manchester (3.4 per cent), Leeds (3.1 per cent), Liverpool (2.6 per cent) and Birmingham (2.6 per cent). For comparison, the UK average for the same period was 2.1 per cent, showing that these predominantly northern cities were well above the rest of the nation.
This northern demand trend is in-line with global real estate service provider Savills’ UK Residential Property Forecast. During the five years leading up to 2024, the report predicts a 15 per cent house price increase with certain locations forecast to grow more than others. The North of England and the Midlands are reported to be especially promising regions for investors during the period.
Property investment continues to be a haven for investors
Purchasing property is still regarded among experts as one of the most prudent financial investments even during the current climate. Looking back on past crises and weighing the forecasts from the time with the actual outcomes gives insight into the current situation and the months ahead.
Alpa Bhakta, Chief Executive Officer at prime property mortgage provider Butterfield Mortgages, explains that organisations and investors are readily adapting to the new climate and she urges caution on “worst-case scenario” predictions. She explained that: “The Centre for Economics and Business Research recently announced that house prices in the UK will fall by 13 per cent by the end of 2020 as a consequence of Covid-19. Of course, there is a natural propensity for forecasts to take into account worst-case scenarios.”
Ms Bhakta added: “We received similar projections in the lead-up to the 2016 EU referendum. One month before the vote took place, HMRC warned that house prices would drop by at least 10 per cent should the UK vote for Brexit and as much as 20 per cent two years following the vote. This proved not to be the case, showing why we should be critical when assessing how certain future events will affect demand for real estate. This is also true when we consider how different sectors of the market are performing, like PCL property.”
Jan Vercerka, Chief Executive Officer at the property investment app BrikkApp, shares the same sentiment as Ms Bhakta. He states that: “SARS and H1N1 both caused short-term volatility in the real estate market, but the market stabilised within three to six months in each case. Even in disaster scenarios such as the current one, real estate remains relatively stable and will continue to be one of the best places to invest in.”
The shared optimism among property market experts — combined with the promising signs that the industry is gradually beginning to restart — should go a long way to reassure investors that property remains one of the safest investment choices and an especially sound one during these difficult times.