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How Will Coronavirus Affect the Property Market?

Written on .

Posted in Buy To Let News, News.

    As the world battles the coronavirus, the long-term effects of lock-down across the UK are yet to be seen, after a promising start to 2020 in both the UK property market and wider economy, there are now reports that the UK could slide into another recession.

    What Experts Are Expecting to Happen to the Property Market Due to Coronavirus:

    House Prices are Likely to Stagnate Due to Coronavirus

    It is currently too early to say what the lasting impacts of the lock-down will be on house prices. However, it is likely to mirror the rest of the economy.

    In the short-term, it is likely house prices will stagnate due to the reduction in property transactions. Thanks to the UK’s strong economy, it is unlikely there will be a price crash in the coming months.

    According to Knight Frank, UK property prices will decrease by 3% during 2020 in line with the predicted shrinking of the wider economy. They forecast that property prices will grow again by 5% in 2021.

    Demand itself has dropped by 70% since early March. Once lock-down restrictions are eased, this is expected to pick back up.

    If residential transaction levels return to between 60% and 80% of normal by January 2021, they should return to normal levels by May 2021.

    Rents

    There is a long-established relationship between wider economic growth, personal income growth, and rental growth. A slowing economy caused by the pandemic will therefore likely result in slower-than-forecast rental growth over the next year. But this should increase once again as the country returns to normal.

    Average rents may fall slightly if some landlords help tenants in financial difficulty through schemes like rental holidays. However, most tenants will continue to pay rent as normal, so short-term rental values should see little to no impact.

    There will also be less movement in the market over the coming months as lock-down restrictions stop people from viewing properties and moving to new ones.

    Coronavirus is affecting the property market by causing large disruptions in developments

    Lock-down restrictions are also impacting house building and development. Some major residential developers, such as Barratt, Taylor Wimpey, and Persimmon, have already begun to suspend construction. It is likely other companies will follow.

    This will inevitably cause a fall in residential delivery and new build sales in 2020. However, the general consensus is that this disruption on residential development delivery will be short-lived and demand will continue in the coming years.

    Once restrictions are relaxed, property development companies may begin to offer new buyer incentives to maintain cash flow and sales rates.

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