The UK property market has perhaps not been hit with such alarge potential threat since the 2008 financial crisis. Throughout the COVID-19pandemic, the UK property market has had to navigate itself through anuncertain maze of difficulty and unexpected challenges. Let’s also not forgetBrexit as well. Overall, the combination of COVID and Brexit could potentiallyhit the UK like a tsunami wave. Or will it..?
To some extent, it really matters which sector you look at.Some sectors of the market have been impacted far more ruthlessly than others.Retail and hospitality have been struck hard, with offices around the countrylaying dormant, and hotels and bars impacted by unpredictable rules andlockdowns.
Main Sectors Impacted
Retail
Retailers who haven’t got a large influx of sales via anonline presence have been hit the hardest, with a significant drop in footfallfor retail stores. The pressure of this ended up being too much for manybusinesses, with many deciding to close up shop. This has left an alreadystruggling high street in many towns in an even worse position. Shops whichwere difficult to fill in the past, are now even more difficult to fill.
Several large brands went into administration during thelast few years including Debenhams, Cath Kidston, and Laura Ashley.
There were many retail businesses struggling pre-COVID, butthe pandemic has sealed their fate.
Student Accommodation
A huge sector in many cities throughout the UK. Manystudents have been delayed returning to University, and simply been told tocontinue their studies from home. This has left many disgruntled studentspaying for accommodation they are not using, and also many students not movinginto accommodation come the new semester. All in all, it has left manylandlords who are normally fighting off student interest, with barely a squeakof interest in their student accommodation.
Bars
Like retail businesses, bars and nightclubs have been hithard during the pandemic. However, unlikely retail, they were not strugglingsignificantly pre-COVID. Bars and nightclubs were the absolute last thing toopen up after the lockdowns. Unlike retail stores who were allowed customers,but under strict rules, bars and nightclubs were just forced to shutcompletely. This meant months of rent and bills to pay without any income atall.
This has led to many bars and nightclubs up and down thecountry closing their doors for good.
Thriving Sectors of the Market
The main thriving sectors are those which provide items thatare required throughout a pandemic. Warehouses, supermarkets, logistics, etc.These are deemed the “essential workers” of the property market world.Therefore many logistics companies have needed to take on more warehouse space,and supermarkets can barely get enough food on their shelves.
How this Impacts the Average Person
Overall, the topic so far has been the impact on businesses.However, have there been any major impacts upon the property market for theaverage person? Perhaps some bargain prices for people to jump on the propertyladder?
Unfortunately, the reality is “not really”.
The pandemic has seen a huge surge in the appreciation formore space and outdoor space. This means property prices have surged for houseswith gardens, as well as properties that have enough room for a spare roomwhich can be converted into a home office.
What we have seen is people leaving the big cities in herdsto the outside boroughs where they can afford larger accommodation. The mainimpact, therefore, has been rental prices in central city locations.Temporarily we saw London rental prices plummet as landlords struggled to keeptheir portfolios afloat while people left the city. However, this has somewhatrebounded since then, as the city gets back to somewhat normality (albeit,we’re not quite there yet).
Estate Agents have backed up the point that many peoplechanged homes during the pandemic. With an increase in interest in ‘flipping’houses. The estate agent “Hamptons” believe that close to 19,000 homes were‘flipped’ during the pandemic. This, on average, led to an average profit ofalmost £50,000 per ‘flip’. This trend cannot be ignored as a potential factorthat has kept house prices buoyant during the pandemic. This has primarily beendriven by the opportunity to save money on Stamp Duty when Rishi Sunak axed the stamp duty on the first £500,000of property purchases temporarily. Overall, this led to a boom in demand forthe property during the pandemic and led to a flurry of activity in the market.
Even areas in the north that have generally been havens forcheaper property prices have seen tremendous increases in annual price risesduring the last couple of years.
There is some argument that we’re due a correction in themarkets (including property markets) in the coming years. So those who feel asthough they’re stuck in the renting cycle and can’t get off the ladder shouldkeep their eyes and ears close to the ground. Conversely, it may also be a badtime to over-leverage yourself into a property if this were to happen. Nobodyreally knows what the long-term economic impact of the pandemic will be, andthe reality is we likely haven’t seen the REAL economic impact. Although insaying this, Russell Galley, who is managing director of Halifax is of the viewthat any property price gains made during the pandemic are unlikely to bereversed.
The main impact of the pandemic is that it has led to peoplereevaluating their lives. People who were in the hustle and bustle of the cityrealised they wanted to be closer to their grandparents in the country. Peoplewho had wanted to quit their job and start a business finally made the jump.People made more risks and changed their lives significantly during thepandemic. Overall, I would describe what has happened during the pandemic inthe property market as more of a reshuffle than a complete change.
