With 2021 nearly upon us, it’s time to look forward to what the next 12 months could bring from a property investment perspective.
Here, we round-up the opinions of three experts in their field to see where they think the market could go in the coming year, from house price growth to Prime Central London.
Sara Ransom, Stacks Property Search
“Prime central London has taken a real hit from the effects of Brexit and the pandemic, and as prices in these areas dropped, so prices in hip areas of East London such as Hoxton and Shoreditch soared. Now Hoxton and Notting Hill are similarly priced, so we fully expect a return to these more traditional areas of the capital,” Ransom says.
“One of the biggest hyped trends of 2020 was that Londoners were literally fleeing the capital for the South West and other far-flung parts of the UK. But rational thought was a quiet underlying trend, many had a change of heart before signing on the dotted line, and some of those who found they’d made a mistake have returned.”
Ransom adds: “As the vaccine rolls out, and some normality starts to return, we expect to see a reverse in the trend. London will become party-central, and those who have endured a winter of deep mud and dark skies will be anxious to return to the safety of London pavements and streetlights.”
“We fully expect demand for property in London to sky-rocket in 2021, and prices will follow closely behind. Brexit will make the UK more interesting to international buyers – London will be the Hong Kong of Europe, the gateway between America and Europe. London has always offered a safe haven for investor cash. It’s an interesting and vibrant city that has shown consistent returns on property investment. We’re seeing a trickle of overseas buyers already, and we expect them to return in force before March.”
She continues: “Areas that will do well domestically include Battersea that will become so much more accessible with the Northern Line extension. Terraced cottages on the Shaftesbury Estate, where gorgeous three-bedroom houses go for under £1 million, are looking very attractive.”
“In Notting Hill £1.5 million-£2 million buys a ‘classically elegant’ raised ground floor flat with tall windows and fantastic proportions in the heart of everything. This looks like excellent capital growth potential to us.”
“Tooting, at the bottom end of the Northern Line, has fantastic cycle routes, big parks, loads of shops and it’s becoming uber-cool. With cottages for around £500,000 now is the time for the bank of Mum and Dad to reach into their pockets to help their first-time buyer offspring jump onto this particularly attractive ladder.”
She concludes: “Similarly appealing is Acton where Crossrail will take residents to Liverpool Street in around ten minutes. Chiswick High Street is nearby, as is the M4 for weekends with the parents. Prices look very compelling compared with adjacent Chiswick.”
Tom Brown, managing director of real estate at Ingenious
“Savills currently forecast a 4% growth in UK house prices in 2020 and the latest data from Halifax shows that they are 7.6% up on November last year. As the sector seems to be shrugging off the lockdown and tiered conditions, we are often being asked if we believe the market is overheated and we are in for a torrid 2021,” Brown says.
“Ordinarily, economic downturn and spikes in unemployment would drive house price falls, but the impacts of this pandemic are more complex. They are expected to be relatively short-term and not structural in the way the global financial crisis was, for instance. In addition, huge numbers have been motivated to consider their living conditions and move up the ladder or locations. The house price data therefore takes into account areas where price growth has been higher, for instance family housing outside city centres, as well as where prices have fallen, such as Prime Central London.”
He adds: “Earlier in the year, the government was swift to act to support the housing market through the pandemic. Construction work continued through both lockdowns, SDLT has been suspended on the first £500,000 for owner occupiers and a short extension to Help to Buy has been introduced to sustain the market, in addition to further reductions in the Base Rate.”
“This stimulus, combined with pent-up demand from the first lockdown has played through to rapidly recovering transaction volumes throughout the second half of 2020. Latest data shows that sales agreed were only down 8% on last year in September, underlining the resilience of the market.”
He continues: “Of course, history has shown us that as unemployment increases, house price growth is negatively impacted on account of affordability. To date, the furlough scheme has enabled many millions of workers to remain in employment despite the economic disruption caused by the pandemic. In addition, the housing market has not been so heavily impacted by unemployment, perhaps because the most pronounced job losses have been in the young, who are generally renters, not homeowners.”
“Whilst house price rises are unlikely to be sustained throughout 2021 and some heat is likely to come out of the market, data does not point to a crash or correction. Knight Frank (KF) forecast a 1% national increase and Savills forecast prices to flatten across 2021. Only 8% of surveyors anticipate any price rise next year. Looking further ahead though, KF and Savills anticipate a cumulative increase of 15% and 20.4% for the five-year period from 2020-2024.”
He concludes: “Crucially for us as lenders to the development market, a national average can mask underlying trends, and geography and price point will show variations in performance. However, the UK’s structural shortage of housing at the affordable end of the market remains. Through active management, to an extent, we can manage economic risks.”
“We are avoiding certain areas of the market and diversifying investments to maintain a balanced portfolio, including developments that are intended for long-term rental and locations where there is a balanced economy.”
Charlie Baxter, managing director and co-founder of Alchemi Group
Baxter, whose company is in the midst of delivering a boutique 17-home scheme in Victoria in the old fire station – Westminster Fire Station – which will see sales launch next year, gave his views on what he believes lies ahead for the UK property market in light of the start of the vaccine rollout, the upcoming end of the SDLT tax relief and the introduction of the increased overseas stamp duty surcharge.
“In the coming months, I anticipate that the property market will continue to hold up well, as a result of the continued shortage of real estate stock, especially for well-designed, sustainable homes, with the £500,000 SDLT relief further supporting this and strengthening the local market until next March,” he says.
“As we saw at the beginning of this year, there also continues to be strong demand locally and internationally amongst international buyers who are snapping up real estate through virtual tours if they can’t do it in person.”
He adds: “The last year has given people a chance to reflect on their priorities – and health and well-being are top of the list. Buyers are taking more time to search for creative inspiring spaces, especially work from home areas that they can enjoy working in.”
“I predict by next spring we’ll see pent-up demand from international buyers and developers will have to raise their game to deliver more inspiring homes. In fact, this month we sold a penthouse in SW8 to an international buyer who valued the thoughtful interior design, layout, and outdoor space. This was sold for a record price in the building and substantially higher than the agents predicted pre-Covid.”
He continues: “I’m also encouraged that the government has recently appointed a Design Watchdog. Our hope is that this will result in a higher level of architecture, design, and quality delivery in London. We all need to be inspired right now, and beautiful design does that, it starts with architecture and materiality and how both work together.”
“With the top four leading economies fully committing to being Carbon Zero ASAP, and the new US president with a $2 trillion green agenda, we predict people will start asking more questions about what sustainability measures have gone into the home that they are buying. Also, the UK hosts the G7 in 2021 and hosts the UN Climate Change Summit in October. The days of developments having to do the bare minimum to comply with a 35% carbon emission reduction will soon be over.”
He concludes: “We have always been conscious of the sustainability of our projects, and we’re incredibly proud of our Westminster Fire Station Development, which is on target to reduce carbon emissions by 47% upon launch next spring.”
This post has originally been featured in Property Investor Today.