Welcome to the 2021 property market expert commentary post…
Reflecting on the completely unexpected turn of events triggered by the pandemic – as well as Brexit, landlording, property-related taxation, sales volumes/velocity factors, development, social housing to name a few of the topics – this year’s contributions are as insightful as ever.
We’d like to express our gratitude to all the experts for their input this year – we certainly appreciate it. A big thanks also to Sam Ash for all her assistance, highly recommended for all your property outsourcing needs!
Head of Government Affairs at RICS (Royal Institute of Chartered Surveyors), Christian Cubitt
“If 2020 has taught us anything it’s don’t make predictions! The impact of the covid-19 pandemic has led to unprecedented changes in the residential property market – fr..om a record slump during the first lockdown to turbocharged sales in late summer onwards. The only certainty we have going into 2021 is more uncertainty, driven by four significant factors.
“Firstly, the roll-out of the vaccine. For more predictable market conditions to occur the rollout must go to plan and start to deliver the levels of immunity required for normal life to resume.
Then there is Brexit. Whether we get a deal, what that looks like, and how that impacts the wider economy will have a significant bearing on the property market.
Thirdly, the UK government’s approach to the housing market. Will it extend the stamp duty holiday or stick to its plan of ending it on 31 March? A decision, either way, will have both short and long terms effects on the market.
And finally, there are consumers themselves. The last year will have caused many to reappraise what they want from their home. Proximity to an office in a city or town centre, so often the driving factor for many consumers, has been replaced by a desire for open space and gardens.
Early answers to these questions mean that by Easter we may be able to better predict how the market will shape up for the rest of 2021. But I wouldn’t bet the house on it.”
Head of UK Residential Research at Knight Frank, Tom Bill
“It is fair to assume that the first four months of 2021 will bear little resemblance to the rest of the year.
Such a diverse range of factors will pull the UK property market in different directions early next year that buyers and sellers are likely to respond in an equally wide-ranging way.
Any useful assessment of what comes next can take place later in the year. The autumn selling season will provide early clues as to what the post-Covid ‘normal’ looks like.
So, what are the factors to consider?
First, let’s look first at the subject that made a late bid to become the biggest risk for the UK market in 2020: Brexit.
Reading anything meaningful into the final days of negotiations is futile. A certain level of theatrics surrounds the talks and sentiment will swing multiple times within the same 24-hour news cycle.
It remains in the economic interest of both sides to reach an agreement against the backdrop of a global pandemic. Neither is it disadvantageous for either side to be seen negotiating hard down to the wire.
If a deal is struck, the pound will rise and find its new trading range. It will also boost sentiment more widely. Many had tuned out the Brexit risk but will still be relieved to know isn’t there anymore. The extent of any acrimony will be a key factor in determining how fruitful any future dialogue is between the UK and EU.
Overseas buyers may face the twin effect of a stronger pound and higher rates of stamp duty from April due to the introduction of a 2% surcharge. Will that be enough to slow the inevitable release of pent-up demand in prime London and Home Counties markets after international travel restrictions are relaxed? To a limited degree, possibly. The surcharge is likely to act as a brake on price inflation and be used as a negotiating tool by international buyers in Q2 next year.
As if we hadn’t had enough of clocks running down in 2020, the government’s furlough scheme (April) and the stamp duty holiday (March) are due to expire in the early part of next year.
There are many questions surrounding the somewhat unknowable effect of ending the furlough scheme. What we know is that the events of 2020 will produce a mixture of winners and losers, something not apparent when looking at the economy through the lens of the High Street or the hospitality industry. Finding reference points from the past is equally tricky as we explore in more detail here.
Overall, the impact of the scheme ending is unlikely to produce a cliff-edge moment for the property market. Any discomfort as the economy re-shapes could be more gradual in terms of its impact on the ability and desire to buy a home.
More broadly, demand for property in the suburbs and country will remain strong. Even against the backdrop a vaccine roll-out programme, viewing and new buyer registration figures at the end of 2020 indicate the ‘escape to the country’ trend isn’t going away. The memory of what could be a 12-month series of lockdowns will ensure it remains a relevant consideration, even if it’s longer-term impact may not be fundamentally transformative.
That won’t narrow the scope for contrarian bets, including on central London flats, especially as international travel restrictions are relaxed and overseas demand picks up.
Unlike the end of furlough, the termination of the stamp duty holiday does represent a cliff-edge moment. How much this affects transaction numbers largely comes down to the simple question of ‘how important is a £15,000 saving?’ In many cases the answer will be ‘very important’ and price negotiations may intensify if the deadline looks like it may be missed.
What’s certain is that the pressure on the government to extend or taper the holiday will increase in the early months of next year. Examples of deals falling through because they won’t be completed before 31 March will not be difficult for the media to find. Indeed, expect new prospective buyer registrations to surge in January as the Christmas break means more people will have had time to reflect on 2020 and attempt to act before the end of the SDLT holiday.
Whether the government prolongs the holiday may come down the economic data in Q1 and whether an extension is politically expedient or will boost the wider economy. Extending the scheme purely because it is the victim of its own success is an argument unlikely to gain much traction.
Either way, it has highlighted the unsettling and distortive effect of systematic tax changes on the housing market as well as the need to speed up a process that can too easily get bogged down in physical paperwork.
Lastly and most importantly, the vaccine roll-out will gather pace exponentially next year. The background noise of Brexit could be replaced by a steady flow of numbers informing us how many people have had the jab. There won’t be a single moment when sentiment turns more positive and buyers and sellers decide it is a good time to act, instead expect Covid-19 to be gradually tuned out.”
Director of Savills Residential Research, Lucian Cook
“Recent results from our survey of over 1,300 prospective buyers and sellers suggest that the stamp duty holiday has provided an added motivation to buy and that there are concerns about the ability to purchase before it ends on March 31 next year.
But it also indicates that renewed social distancing measures have made buyers more committed to a move over the next 12 months and that a successful rollout of vaccines will support that further, especially in markets such as central London which have been held back by international travel restrictions.
As a consequence, while the uncertain economic and political backdrop is likely to mean the prime market remains price sensitive during 2021, we expect activity to remain relatively strong into the spring and less exposed than other parts of the housing market to a subsequent cooling off, with prime central London looking a ‘buy’ opportunity, particularly for dollar buyers.”
Head of Research at Zoopla, Gráinne Gilmore
“We saw an escalation of growth as we headed toward the end of the year. If we had said that prices would be up 4% by the end of 2020 while we were all sitting in lockdown, that would have been questioned. However, what we could see at that time was the demand building and that has continued to be a theme.
It’s not just the pent-up demand that has had an impact, but also a ‘once in a lifetime’ reassessment among some homeowners about how and where they want to live. When we look at the pipeline of activity the figure is much higher. The pipeline of activity being pushed through to meet the stamp duty deadline will also create a bit of a bumper first quarter of 2021. While completions might be 6% lower, we know the pipeline of activity exceeds the figure seen this time last year.”
There will be people who were enticed by the potential savings that will not move if they do not make the deadline. However, around three-quarters of private households are owned by those aged over 45 years old, a demographic that generally tends to move less than younger people, but we are seeing far more activity than usual from these homeowners.
While there are many factors at play, such as the Brexit deal and the rate at which the economy recovers, I believe that transactions will remain ‘broadly stable’ in 2021. In terms of pricing, we think that prices will be up 1% at the end of next year, which is no mean feat. In real terms that is probably a fall in pricing but up 1% in nominal terms. This will mean an easing from where we are now.”
Director of Property Data at Rightmove, Tim Bannister
“2021 has a lot of variables, and so is not an easy one to call, but with Rightmove’s unique leading indicators of buyer and seller behaviour we are confident that the housing market will continue to outperform general expectations next year as it did this.
Our 2021 forecast of a 4% price rise is more conservative than the unsustainable 6.6% national average seen this year. There’s likely to be a lull in quarter two unless the stamp duty holiday is extended, but for many buyers its removal will not be make or break, though may lead them to reduce their offers to a degree to compensate for the higher tax, and indeed many sellers may be prepared to help to mitigate their buyer’s financial loss.
First-time buyers will remain largely exempt, so in most cases will be no worse off. The maximum savings of £2,450 in Wales or £2,100 in Scotland are considerably less decisive than the £15,000 available in England for a house costing £500,000 or more, which does however only apply to a small part of the market.
Despite the headwinds, ongoing demand still remains very high, indicating that there’s plenty of fuel left in the tank for the housing market. Interest rates remain at near-record lows, and we expect greater availability of low-deposit mortgages at competitive rates next year. These two factors will help to oil the wheels for home purchases by the ‘accidental savers’ who have collectively saved £100 billion that they couldn’t spend during the pandemic restrictions.
With the expectation of a return to more normality in the second half of 2021 and a likely ‘fresh start’ mentality for some, there are sound reasons for continued positive market sentiment that will outweigh the economic, political, and health challenges ahead. Rural, countryside and coastal demand will remain high for those re-appraising their lifestyle, but more normality will also help the recovery of those aspects of city-living that have seen a dip in their appeal.”
Property Expert, Henry Pryor
“The last year has been an extraordinary experience. Estate agents have been unexpected beneficiaries of the Pandemic with most rushed off their feet. How long it will last is anyone’s guess but at the end of 2020 most will have a spring in their step as they head into 2021.
I’ve never been busier, I have more clients than ever and am buying a property once a week despite having wondered back in April whether I’d have a business at all. I’ve tried to give my buying clients a sober assessment of the coming months and whilst they all agree that now is a strange time to be making such a big commitment most say that this applies to other people and they want to crack on.
At some stage, we must surely have to pay for the pandemic. We saw a substantial spending review in November and will hear how it is all to be paid for in the coming Budget but it’s clear that homes and the property market have survived Coronavirus well and must surely be a target for tax raising sooner rather than later.
I’m not expecting the market to crash but it may slide. I suspect that the forecast from the OBR of -8% may be as good an assessment of what we can expect although I think many people won’t see this. As a result fewer people will actually sell and this may be what the housing market in 2021 is remembered for rather than significant price falls.
As always, remember that no one knows what is going to happen. All we can do is to plan ahead and minimise the risks.”
Chairman at Acadata, Peter Williams
“Acadata provides an independent assessment of completed sales in the housing market, covering both cash and mortgage transactions. Each month this work is released as part of a wider e.surv index release for England and Wales and is free to use. There is also a Scottish index.
Acadata is developing a number of new tools including a “Dashboard” with a house price look-up facility by the local authority and by property type. Please contact firstname.lastname@example.org for further information on products and prices and do follow us on Twitter @acadatauk
Looking back – a year of adjustment
2020 has been something of a roller coaster as far as the market has been concerned – up at the start of the year, then down in March to May, and then up again in terms of activity and prices, with the latter ending the year some 6/8% higher than where we started.
Clearly, that performance has varied by region, locality, and indeed by property type. In broad terms, the South of England has seen prices rise further than the North and detached homes have recorded higher % increases than flats. The so-called “race for space” has been part of this with households rethinking their housing options in the light of both health and work-related issues.
The Stamp Duty holiday announced in July was a major factor in the strong market rebound witnessed in the second half of the year in the market and this resulted in estate agents, lenders, and conveyancers all experiencing heightened volumes of business at a time when they were still adjusting to the exigencies of remote working as a consequence of the Covid pandemic. The upshot of this was slower completion times.
As the year has progressed so the focus has shifted towards the outlook for 2021 with not only the economic impacts of Brexit and Covid but more specifically the scheduled end of Stamp Duty holiday in March alongside the reworking of the current Help to Buy scheme (in future restricted to first-time buyers only and with stringent regional price caps). This has induced a degree of frenzy and pragmatism in the market as households rush to complete transactions prior to the looming deadlines.
Looking forward – a year of transitions?
Most would agree that the housing market outlook for 2021 is characterized by uncertainty. It is possible to construct plausible cases for both boom and bust but the reality is that so much turns on what happens to the economy and employment. We have seen price forecasts for 2021 which range from broadly flat to 10/15% down. Given the spectrum and the context, this outlook has induced considerable caution amongst mortgage lenders with respect to higher LTV lending and affordability assessment. By 2020 the availability of high LTV mortgages has fluctuated wildly as lenders withdrew products and then returned with limited “flash sale” offers as a way of controlling their market exposure. There will be available in 2021 but choices will still be limited and the costs will be higher.
Given all this uncertainty it is no surprise that there has been an industry lobby to continue the SD holiday with firms arguing for both a few months extra to ensure all the transactions that have started can complete and benefit from the tax relief as well as making the case for the current arrangements to be made permanent to support the economy and avoid any cliff-edge collapse in the housing market.
It is already clear that the SD holiday-induced activity has resulted in higher prices which have nullified the gains many buyers might achieve via the cut. The holiday has applied to both home buyers and landlords and the latter have returned in some strength to the market not only competing with first-time buyers but also recognizing the squeeze on present and future incomes which will sustain the demand for renting.
Given the deep political sensitivity which exists around the housing market, it is hard to predict whether this lobby will be successful and much will turn on the outcome of Brexit talks, the trajectory of Covid, and the shape of the economy as we get to the spring of 2021. If the holiday ends as planned (setting aside any short-term transitions for pending sales) then based on previous experience and given the purchases that have been brought forward we will see activity slump from April onwards for a few months. It is possible that this in conjunction with a weakened economy (and a repurposed Help to Buy scheme) could result in falling property prices.
We can see from our latest release that the rate of monthly price growth has diminished in the last few months. This will start to feed into the annual index and if that monthly contraction continues we could be in negative territory by March in terms of the monthly. The annual index will lag that and it is still possible that by the end of 2021 we will see annual prices close to flat for the year. Only time will tell!
Acadata will continue to track the market closely so do follow us on social media and via the web.”
Peter Williams – Chairman, Acadata
Managing Director at Dataloft, Sandra Jones
“‘Impact’ will be the watchword for 2021 – social impact, environmental impact, impact investing. It will enter the vocabulary of the housing market and it will become increasingly influential in decisions made by buyers, renters, investors and advisors.
The outgoing year began with climate change activists commanding headlines then as the pandemic unfolded, the focus turned to the role of communities and community workers. In December, Mark Carney, one of the most influential central bankers on the planet, gave a series of public lectures about the true meaning of ‘value’, suggesting that it should go far wider than the narrow definition of financial value so that ‘values drive value’. At that point it was clear that something fundamental had shifted in the national psyche.
So, with that in mind, my predictions for 2021 are all related to the themes of community, environment and wellbeing.
‘Zero-carbon features’ will begin to be measurable in prices achieved for sales and rental. Consumers will demand that house-builders consider the environmental impact of materials and methods used in construction, as well as the running costs and maintenance of a home. Environmental impact messages will seep into marketing messages, supplier and client relationships and investment criteria. In the same way that it became unacceptable to use plastic carrier bags, it will begin to feel uncomfortable to live in homes that are profligate with heat and energy.
By the time Glasgow hosts COP26, the UN Climate Change Conference, in November 2021, the level of public awareness will be significantly higher than today. Large companies will be required to report their plans for moving to net zero, lenders will scrutinise their borrowers and small businesses will be expected to acknowledge their responsibilities too. Consumers will ask more questions and demand more information which will put the onus on developers, agents and landlords to provide answers.
Value will attach to flexibility – in the design of our homes and also in the range of tenures. We all learned to be more adaptable in 2020 and that flexibility can be designed into homes. It could manifest in many different ways: the ability to reposition partition walls, to easily swap the way rooms are used, share common facilities, open up new spaces; subdivide homes to allow multi-generational living.
Build to rent providers will devise new products to match a broader range of lifestyles and budgets. It will include Single Family Housing for those who want to put down roots and flexible tenure for those who don’t. For the ‘digital nomad’ providers will develop reciprocal arrangements between cities and countries so that footloose renters can truly work from anywhere – perhaps spending winter in one place and summer in another.
There will be a revival of the pied a terre in London. People who relocated in 2020 while offices were effectively closed, will miss the conviviality and opportunities of the city once life returns. That will fuel the market for centrally located one bed apartments or co-living spaces, especially in the rental market. The pied a terre can double up as a base for touch-down working.
At the same time, the adoption of more agile work habits will restore daytime vitality to suburban and small town high streets. Even if people work from home two days a week, it will transform the demographic on local high streets. Cafes, shops and neighbourhood offices will all benefit. This presents an opportunity for estate agents to consolidate their role in the community by encouraging people into their offices, offering to share their workspaces, hiring out meeting rooms, hosting seminars or networking events. People will put more value on communities and be more willing to invest time and energy in the places close to home.
The idea of the 15-minute city will gain traction – sustainable places with a mix of uses where residents can work, learn, shop, socialise and exercise all within 15 minutes of home, by foot, bike or public transport. In places like these, the car is no longer in the driving seat. Paris has committed to the concept, as has Melbourne.
I’ve always preferred painting scenarios to making predictions. Envisaging scenarios means planning for either outcome and being surprised by neither outcome. Because, even when predictions turn out to be right, they are generally right for the wrong reasons.
In January 2020, I predicted for the year ahead: “the ability to work from home and work from home facilities, will affect home design and pricing” – which turned out to be pretty accurate though I would not claim for a moment to have anticipated the reason why. Whatever happens in the year ahead, it is important to keep an eye on the big themes that transcend even the most dramatic and unexpected twists of fortune.”
CEO of Optivo and Honorary Professor at the Bartlett School of Construction and Project Management, Paul Hackett CBE
“In normal times 2021 would have been earmarked as a bumper year for affordable housing delivery. Historically, the final year of an Affordable Homes Programme brings about a glut of affordable completions, and, before the onset of the pandemic, there were few reasons to believe the 2016-21 Shared Ownership and Affordable Homes Programme would be any different. However, like its predecessor, 2021 will be anything but a normal year. In fact, so severe have the difficulties posed by Covid-19 been, it won’t even be the final year of the program – Homes England has granted housing associations a 12-month extension to compensate for construction delays induced by March’s lockdown and ongoing social distancing requirements.
For better or worse, 2021 will be the year we start to really understand what Brexit means. The prospect of our departure from the European Union has weighed heavily on the housing market ever since the unexpected referendum results in June 2016. Activity and prices have recovered well in 2020 with the housing market proving remarkably buoyant in the face of the severe challenges posed by the pandemic. Savills have calculated that the average home gained £12,599 in value in the first 10 months of 2020 compared with the £10,359 in the preceding three and a half years. But with the transition period coming to an end on 31 December and ‘no deal’ a substantial possibility at the time of writing, that recovery is likely to be short-lived.
Assuming optimistically that a deal is reached with the EU, the consensus seems to be that prices are set to fall in 2021, or remain stable at the very best. Forecasts from the Office for Budget Responsibility published alongside November’s Spending Review showed that prices would fall by 8.3% by Q4 2021 and not recover until the end of 2022. The fall will begin at the end of March with the end of the stamp duty holiday accompanied by revisions to Help to Buy and the end of the furlough scheme.
Back in the 1990s, when Government grant accounted for 75% of the cost of new affordable housebuilding, such trends wouldn’t have registered too highly on the risk radar of a typical housing association. Now though, with grant constituting just 12% of total construction costs, they are very much a material concern. Because of their cross-subsidy models and (variable) reliance on s106 deals, housing associations’ ability to supply new much-needed affordable housing is intrinsically linked to the waxing and waning of the housing market.
2021 will also see a further recalibration of new-build ambitions and the increasing need to invest in existing stock. Ongoing remediation work to improve safety and stock quality is our utmost priority. But that must also be accompanied by a concerted effort to decarbonize our existing stock, especially if, as has been recommended, the deadline for upgrading homes to meet EPC Band C is brought forward two years to 2028. The latest Financial Forecast Return data from housing associations indicate that average spend on social housing per unit is expected to rise by 7.4% by 2024/25.
The nature of this balancing act between investment in existing and new stock is reflected in the Regulator of Social Housing’s most recent sector risk profile. Housing associations have reduced or re-profiled their development forecasts. Development in 2020/21 is set to be 36% lower than forecast just a year ago and 13% lower in 2021/22. Forecast output of homes for outright sale and market rent is down by a third reflecting growing uncertainty over demand.
To add to this, 2021 will be one of significant policy upheaval with the introduction of a new model of shared ownership accompanied by reforms to the planning system. We’ll also transition to the new 2021-26 Affordable Homes Programme and see the phased introduction of the swathe of measures in the Government’s Social Housing White Paper.
This looks like being an era of continual upheaval and flux. What remains certain though is a strong and growing demand for affordable housing. With demand for safe, secure, and affordable housing likely to increase substantially following the economic damage associated with Brexit and Covid, the sector must do all it can to improve housing conditions whether upgrading existing homes or investing in new ones.”
Chief Executive Officer at SPI Capital, Anna Harper
“Predicting the future in an environment of uncertainty is a risky business. But then, without some level of risk, there is no reward. Now more than ever, considering and planning for the future in a way that keeps risks to a minimum is important and relevant to property investors of all scales. To do that, we must first consider the drivers behind what’s to come.
So here are 12 predictions for the UK residential property market in 2021.
- Continued economic uncertainties – there’s no getting around this one. Economic uncertainties have a substantial impact on the housing market. But the impact of economic uncertainty in the UK housing market has been equalled in 2020 by another important risk factor…
- …Continued political uncertainties and policy shifts – the truth is, the UK housing market is heavily influenced by policy and tax decisions. Key drivers will include the desire to create a more level playing field in terms of access to quality, affordable housing (for example, continued encouragement for first-time buyers, and a more professional rental market) and the need to raise tax revenues (for example Capital Gains Tax). A common criticism of policies affecting the housing market is a lack of joined-up thinking, and a bias towards policies that will create the right headlines. This, may well continue.
- Continued growth in rental demand – first-time buyers are feeling the pinch of affordability constraints, and increasingly appreciate the benefits and flexibility associated with ‘access over ownership’. It is worth noting that within this, there will likely be…
- …Continued inter- and intra-regional changes in sales and rental demand – this trend has been evidenced most clearly by falling demand for properties in our expensive city centres. A salient example is the fall in sales and rental demand for, and therefore prices of, prime Central London flats vs larger properties in suburban outskirts of the city and commuter/regional towns.
- The shift towards more professional delivery of rental housing – this trend has been encouraged by regulations, in particular since 2015. Investors and operators are responding by either scaling up and making efforts to operate in a more professional manner, or selling stock that they realise is increasingly difficult to manage properly on the side of their other commitments. As providers become more professional, they are likely to focus on specific markets, both geographically and in terms of demographics, where they can deliver a brilliant ‘product’. For my business, SPI Capital, this includes a strong focus on key worker housing in the Northern Powerhouse and Oxford-Cambridge Arc. For others, it is about focusing on young professionals in regional towns, students at Redbrick Universities or OAPs in coastal towns.
- Increasing institutional residential investment – pension funds, insurers and Private Equity firms have recognised the benefits of the UK Private Rental Sector, and will grow their investment in this space relative to other sub-sectors. This may be in the form of Built to Rent schemes, or through investing in Private Rental Sector businesses who can give them access to what they want and need: compelling yields and a sustainable place to invest
- Increasing importance of social responsibility – ESG investment now amounts to some $30 trillion AUM. Significant funding has been allocated to ‘socially responsible property investment’ – and this trend looks set to continue. The turbulent environment of 2020 has forced naysayers to recognise that investing in a way that is economically resilient with positive social impacts can be better for profit, people and planet.
- Emergence of the ‘corporate landlord’ – as the aforementioned trend towards a more professionally managed Private Rental Sector continues, many sideline landlords are recognising that they do not have the knowledge, skills and network needed to manage rental investments in a way that is professional. At the other end of the scale is the rise in institutional investment mentioned above. In the middle, there is an emergent class of landlords who are scaling up and focusing their efforts on delivering a great product across 20, 200, or 2000 properties.
- Increase in demand for professional, end to end portfolio management – what we are seeing from High Net Worth Individuals is the acceptance that diversifying your residential portfolio can be a great way to reduce portfolio risk, for example e.g. 20 flats rather than 1 prime London flat. However, in reducing portfolio risk, this strategy also increases the burden of management, which makes hiring a professional to oversee your portfolio all the more worthwhile.
- Interest rates remaining low – meaning that banks that are actively lending will be doing so at relatively low borrowing costs for investors and home buyers. It also means that there will be a continued…
- …Absence of compelling, sustainable alternatives – 2020 has been a year of dramatic turbulence in the stock market. Meanwhile, savings product returns have veered towards zero. For many of the investors we work with, residential property and the strong, sustainable returns it can offer, are becoming more attractive relative to the available alternatives.
- Acceptance of importance of risk mitigation and management – For many years, ‘rogue landlords’ got away with taking substantial health and safety, regulatory and even financial risks. 2020 has highlighted the need for investors from all walks of life to take steps to strategically identify, manage and mitigate risk.”
Founder & CEO at Realyse (Housing Market Intelligence), Gavriel Merkado
“High end well operated rental accommodation, whether that is build to rent or other professionally managed and serviced blocks will be the net beneficiary of the crises for years to come.
This was the case in the US following the financial crisis, a time when in the UK the market was dominated by individual landlords.
This is largely driven by the increasing requirements for mobility and flexibility in the labor force, increased sensitivity to low-quality build to sell a product, and difficulties in raising a deposit particularly among those who had to spend from savings or use debt during the crisis.
Office use will decline, as tenancies end and employers and employees look to optimize between working from home and working from the office, with a large amount of hybrid working environments resulting. This leads to a large amount of redundant office space some of which is then available for conversion to residential. I see the emergence of more vertically mixed-use developments.
Retail gets a second (light) wind, particularly in formerly commuter towns as people now working from home go out to find lunch, groceries, gifts, clothes, and experiences nearer home instead of nearer their former offices.
Residential goes through a series of fluctuations. Those who can afford to move and have the flexibility to do so continue their trend out of the cities. On the other side, those with fixed work locations, or without work, have to stay where they are.
At first, the trend out of the cities continues to push more suburban location prices and rents up, however, a tapering off of the stamp duty holiday allows people to find a happy medium as they discover that they miss some aspects of the cities and come back inward again.
QE5 (money printing round 5) begins to result in vast pools of money accumulating as it normally does, somewhere near the top. The increase in the capital available to some UHNWs who then see the opportunity of losses faced by other UHNWs and the final resolution of Brexit results in a rush for the super-prime property.”
Senior Economist at the Construction Products Association, Rebecca Larkin
“2020 was far from a simple year for the housing market and although the continued flow of pent-up demand will spill over into the early part of 2021, there’s a lot of nervousness about what will happen to demand when the current raft of policy support is withdrawn. The stamp duty holiday, the first phase of Help to Buy, and government packages to support jobs are all scheduled to expire on 31 March.
Of course, the hope is that by then the economy will be on a firmer footing and climbing back up towards its pre-coronavirus levels of output, particularly as the rollout of the Covid vaccines accelerates. In addition, the extended job support schemes for employees and the self-employed should help prevent the unemployment rate from spiking above 8% (from 4% before the pandemic hit).
However, the March expiry of other measures does have the potential to leave some gaps. Past experience suggests that a stamp duty holiday brings forward transactions that would have occurred beyond the deadline, which raises the likelihood of a short-term dip in activity from April. How short term links back to how strong the economy and labor market have recovered to by that point.
From April, the Help to Buy equity loan will be open to first-time buyers only. Given that this is the segment of the market most reliant on increasingly scarce high loan-to-value mortgages, it’s likely to help keep the newly build part of the market going. That doesn’t do much for chains, though, and still removes the 20% of equity loan take-up from second-steppers over the last seven years.
More pertinent is the introduction of regional price caps for the new phase of the Help to Buy scheme. The nationwide £600,000 cap led to the highest proportion of 3 and 4-bed homes being built, but the new thresholds are likely to be in conflict with this product mix, particularly in higher-value areas. Smaller properties and even a move back to building flats also appear to be at odds with the emerging longer-term shift in demand for space and garden access that has been brought about by a period of homeworking.
With these headwinds swirling ahead, sentiment towards the 2021 housing market and new house building will undoubtedly be affected by that long-running buzzword of uncertainty as we have Brexit to throw into the mix too. Tracking forecasts for the overall economy, and taking into account the wavy profile of activity expected from quarter to quarter in 2021, the CPA’s main forecast scenario envisages new build housing only returning to its pre-coronavirus levels in 2022. As the past year has taught us, nothing can be ruled out and it looks like the government is standing ready to step in with additional support if required.”
Head of Strategy and Enterprise at Howsy, Richard Berridge
“In February 2002, Donald Rumsfeld responded to a question at a US Department of Defence news briefing: “…because as we know, there are known knowns; there are things we know we know. We also know there are known unknowns; that is to say, we know there are some things we do not know. But there are also unknown unknowns—the ones we don’t know we don’t know. And if one looks throughout the history of our country and other free countries, it is the latter category that tends to be the difficult ones”.
The latter category is where we sit. As far as Brexit is concerned, there appears to be a knowledge vacuum at the heart of government; led by someone resembling the scarecrow from the Wizard of Oz, supported by louche fund managers, a geographically challenged SoS for Foreign Affairs, and gunboat toting backbenchers. Not to mention those, deficient in simple maths, who believe tariffs are an opportunity to make £billions in income.
So Brexit’s 2021 outcome is anyone’s guess. I’m not going to make one.
Then there’s Covid-19.
Whilst Brexit is self-inflicted, Covid-19 certainly is not. Irrespective of the government’s handling of this pandemic, it has changed society forever.
Some things may eventually return to what we used to call ‘normal’ Some may not. In any event, ‘normal service’ of any kind is unlikely to be resumed in 2021.
So, as real-estate experts we, at Howsy.com, have to assess what change is temporary and what’s permanent. This may not be quite so crucial if one is adapting to the temporary and various time-limited rules imposed by Gov’t: how one performs is a function of adaptation. But it is crucially important when we look to the future where behavioural change creates obsolescence in real-estate. Specifically, residential. However, we can’t ignore other sectors when it comes to understanding how our own will be impacted.
So, when deciding between temporary and permanent change, what do we have to go on?
Firstly, we have to understand the psychology of change and habit. We’re all familiar with trends during the pandemic period: in general terms, people have moved away from city centres, have found more space in the suburbs and in houses, and have discovered the benefits and relative safety of personal space. That is: no common entrance, common rooms, corridors, or lifts. Therefore, no communal spaces where one could come into contact with others.
In 2009, psychologist Dr. Phillipa Lally published research that suggested we could form new habits and behaviours in, on average, 66 days. As we know, we’ve all lived with imposed change since the 23rd of March 2020. Significantly more than 66 days. Our routines have been fundamentally shaken. We work from home a great deal more. Microsoft reported a 500% increase in the use of ‘Teams’ in 2020 and Zoom reported first-time downloads of their app up 728%. Kate Lister, President of Global Workspace Analytics estimates that 25-30% of the workforce will be working from home multiple days a week. This is, I think, one of those ‘new norms’. New habits. New behaviours.
This being the case, for perhaps 30% of us, for at least half the week, this means our journey to work will start from our kitchen, and the required tea or coffee, to our study or whatever home-space we have designated as ‘work-space’.
The ramifications of this are wide ranging:
- We will require high quality, reliable connectivity
- We will require a viable space at home to work
- We will travel less
- We will spend less
- We will consume more energy at home
How the BTR sector responds to this is going to be crucial for delivering high quality live/workspaces that cater for today’s needs. I say needs rather than ‘desires’ as desires are an abstract, whereas needs are rather more fundamental.
So, it’s a done deal. We have the technology. We have examples of tech companies like Google and Facebook who have told their employees not to bother with the office ‘till mid-2021 and Gitlab who employ over 1,200 people and have no office. To top it off, 70-75% of us say it’s worked well.
A done deal? Well, not so fast. It’s all very well having the tools to work remotely, aligning ourselves with distributed digital companies and being delighted with productivity and our accelerated adaptability. But there’s plenty of evidence to suggest people feel less connected with the non-visceral nature of our engagement. We need to understand the socio-psychological factors at play. It’s not simply that we need to learn better how to work remotely. However proficient we become; eye-contact, body language, micro-expressions, gestures, touch are something that require face-to-face contact. Research has shown that our neural pathways differentiate between on-line and in-person. Resulting in, amongst other things, excess fatigue. Life, as ever, is nuanced.
And so BTR has to be nuanced. Our newly acquired habits combined with advanced connectivity and sociological thinking have to be reflected in what BTR offers. These factors play to the advantages offered by BTR Single-Family Housing (SFH). We already know that 80% of the UK housing stock are houses and that the ONS had detected a small, but measurable, migration away from cities. Even before Covid-19.
So, 2021 will see two main BTR strands. The first is that this will be the year when we see an explosion of investors piling into SFH. Each will have their own take on the sector and how to satisfy the needs that have become self-evident based on the material change in our lives driven by Covid-19.
The second is something I touched upon in last year’s piece for PS Investors: Sustainability
A year is a long time in real-estate these days and very few days go by without an investor highlighting their commitment to Environmental, Social and Governance (ESG). Shortly after I wrote last year’s piece, Larry Fink, CEO of Blackrock, wrote his now oft-quoted ‘Letter to CEOs’. In which he outlines that “Climate risk is investment risk”. The pace at which investors have taken up the baton on ESG is astonishing and I can’t think of a single institutional investor in the UK that hasn’t proclaimed its commitment to ESG.
Perhaps some of this is simply paying lip-service, but my feeling is that this movement towards sustainability, social responsibility and transparent governance is real and impactful. And it has to be because the future value of assets will be predicated on the sustainability credentials of those assets. It will also have an impact on the ability to finance such assets.
ESG has huge implications for BTR. The very institutions driving ESG forward are those investing heavily in the sector. Clearly, this means that BTR must be aligned with their investors. But this is going to cause some difficulties in the housing sector since there is an ESG disconnect between housebuilders building for owner-occupation and investors building for BTR SFH.
Government has taken the pressure off housebuilders by removing wording in “The Ten Point Plan for a Green Industrial Revolution” that would have seen fossil-based heating systems banned by 2023. Since also there’s no mention in the plan of Philip Hammond’s original 2025 target date for the ban, it can be assumed a deal of prevarication and not a little lobbying is going on. In any event, since potential regulation applies only to heating, “cooking on gas” will remain a modern-day phrase for the foreseeable future.
Potentially, this may mean that in wishing to protect the future value of BTR assets by sticking to their ESG guns, investors could incur additional development costs. It may also mean that renters could be living in homes that are considerably more sustainable and energy-efficient than those who buy their new homes.
But, this simply plays to the hand of the emerging SFH sector: Low built/low density, compatible with a range of MMC solutions. A number of companies like SeroHomes.com are already building sustainable houses with IoT connectivity, PV’s, energy storage units, carbon zero, energy-efficient, three-phase electricity and EV charging points.
So, my two principal predictions for 2021 actually merge as one: the emergence of Sustainable, Rented Single Family Housing.
I see this as BTR’s most important focus in the coming year. Building upon Sigma Capital’s investment in the SFH sector, others have announced they are following: Packaged Living, L&G, Godwin Group & Moorfield. I expect the list to grow exponentially.
SFH will also require a subtly different approach to operational management as the dynamics of living in an entirely self-contained home are very different to those contained within a multi-housing envelope with concomitant health and safety, asset and M&E management commitments.
BTR has led the way in revolutionising the PRS. Particularly in the focus on customer experience and mutual trust. There’s also been a great deal of work on combining amenity with community. This is clearly an initiative & strategy that works well in apartment blocks in urban locations and has led to very positive reviews of the sector on Homeviews.com. However, the research we have undertaken at Howsy has given us insights into the dynamic differences between SFH and the urban BTR sector.
It’s clear to us that transference of BTR operational management over to SFH is a mistake as there are substantial socio-psychological differences between those who choose to live in urban apartments and those who opt for suburban houses. These differences manifest themselves in how each choose to interact, how they accept disruption, the impact of loneliness, view of community, social status, conformity (amongst other things)
This has led us to develop a SFH management model distinct from that currently employed in the urban BTR sector. We think this is an important distinction to ensure the long-term success of the SFH.
So, whilst 2021 will be challenging, there is cause for optimism. The ESG movement is both substantial and vital, and the rise of SFH is a welcome acknowledgment by the investment community that houses are the UK’s most popular typology.
We hope you all have a very successful 2021.”
Director at Just Do Property, Julie Hanson
“As we look towards 2021, we can only speculate what the next 12 months hold for the UK property market. We thought it would be interesting to revisit some of the subjects we looked at last year to see what the future holds.
Interestingly, the UK government is about to launch another Help to Buy scheme running from December 2020 to 2023. However, there are some subtle changes with this new Help to Buy scheme:
- Maximum funding of 20% rising to 40% in London (no change)
- Cap on price of new build properties purchased using Help to Buy scheme
- Stringent quality controls
- Guaranteed new home warranty prior to purchase
While these all seem very sensible and straightforward conditions, many of them have been sadly lacking in previous Help to Buy schemes. The maximum price of new build properties purchased using the scheme will be capped. The measure will be a max of 1.5 times the average house price for first-time buyers in any given region. There had been significant criticism that previous Help to Buy schemes were pushing new build prices way beyond the reach of first-time buyers. Not anymore!
London property prices
On the plus side we have the government’s stamp duty holiday scheme although this will come to an end on 31 March 2021. As a consequence, many experts believe there will be renewed interest in property over the next three months. This will likely be followed by a lull with many experts believing London property prices could fall by around 1% in 2021. However, this will follow a predicted 2.5% increase in London prices in 2020.
As ever, these predictions for London property prices could be subject to major change. Will the UK and EU agree a last-minute deal? Will the UK be cast adrift from the European Union to prosper as an independent nation? Despite four years of discussions and disagreements, nobody knows with any real certainty about the potential impact of Brexit.
To say the last few years have been challenging for private landlords is an understatement. We have seen a raft of new regulations and charges, with many landlords building up huge debts during the COVID pandemic. There are signs that landlords are returning to the market although rental demand may take longer to recover. As a consequence, we could see a huge difference in rental market performances in regions and income bands, up and down the country.
It will be interesting to see what level of assistance is available for private landlords once the COVID pandemic is under control. While we have seen many new regulations and protections for tenants, there has been nothing in the way of concrete financial assistance for private landlords. Many critics will point towards the mortgage holidays offered to private landlords during the pandemic.
However, these people forget that landlords will still need to pay back this debt over the longer term.
Will property investors stick to new regional trends?
Over the last couple of years we have seen significant disinvestment from London property and reinvestment into regional markets. While the potential for long-term capital growth may not match the London market, the rental yields on offer very often leave London in the shade. So, it made sense for many private investors, hit by numerous regulations and charges in recent years, to look at high yielding markets. While we have learned many things from the COVID pandemic, one which stands out is the relative weakness of some regional economies.
The North of England is a prime example, where the wheels seem to have come off the local economy. The COVID crisis has exposed numerous weaknesses. While this may slow down the rate of disinvestment from London and reinvestment to regional markets, it may not end the trend. We have seen many public and private bodies switching their headquarters from London to the likes of the Midlands and the North of England. Indeed HMRC continues to relocate significant numbers of staff outside of London. The trend may not be as strong as it has been over the last couple of years, but don’t write off regional markets just yet.
As we flip-flop between lockdown and tight restrictions, it is difficult to get a real handle on demand for UK property and transaction numbers. There is no doubt that the stamp duty holiday has helped, the forthcoming Help to Buy scheme will offer further assistance but interest rates are the key.
Hovering just over 0%, there is even talk that UK base rates could move into negative territory, forcing significant investment into the economy. Whether this is an idle or a real threat remains to be seen.
It is no surprise to learn that UK mortgage rates are relatively low, and there are some exceptional short to medium-term fixed-rate offers. Quite how much lower mortgage rates will go remains to be seen as there needs to be a degree of profitability for lenders, to reflect the risk/reward ratio.
Relatively cheap finance would appear here to stay for some time to come. Maybe we will see more focus on household incomes and the future cost of living.
UK property prices
To say there is variation and uncertainty in forecasts for UK property prices in 2021 is an understatement. On one hand we have the likes of Rightmove and Zoopla suggesting there will be genuine support for UK property in 2021. These two companies expect little if any reduction in house prices next year.
On the flip side, we have the Halifax, Nationwide and Centre for Economic and Business Research (CEBR) issuing downbeat forecasts for the UK property market. The Halifax is expecting “greater downward pressure on house prices in the medium-term”. Nationwide believes that a winding down of UK government COVID support schemes could “dampen housing activity”.
Then we have the CEBR which has taken a very different approach, suggesting that UK house prices could fall by 14% in 2021. These are all well-respected bodies in the world of UK property, but how can their forecasts be so different?
The truth is that you could pick one of a dozen different scenarios for the UK economy in 2021, and justify each one. The performance of the economy will obviously have a significant impact on UK house prices. While the optimists are suggesting a relatively stable market, the pessimists are suggesting a significant fall. At this moment in time, the majority are on the side of concern, but things could change tomorrow.
The UK property market has been relatively stable in light of the 2008 US mortgage crisis, worldwide recession, COVID and other Brexit-related complications.
In many ways the key to short-term property price trends will be directly related to investor confidence. At the moment it is difficult to see any good news on the horizon. Then again, a significant lack of new build properties over the last few years has left a degree of pent-up demand. Whatever happens, 2021 will be a year property investors will never forget!”
Chief Executive at Trusted Land, Alex Harrington-Griffin
“Diving straight in and avoiding too many 2020 cliche’s, micro and small developers will find 2021 challenging. Not so much in terms of deals, but funding and exit plans. I feel the recessionary effect of the pandemic has kicked a lot of the greater market effects down the road, which will mean the pressure on developers presenting their development projects to investors and lenders will come under greater scrutiny. I get to spend dozens of hours with many SME developers every month and I’m seeing no shortage of optimism, deals and appetite, so matching the deals with the funding will be key.
After hosting an expert stakeholder roundtable on building virtual trust in the Autumn, we recognised that the money piece of the puzzle will be the tricky part for 2021. The temptation for stakeholders to want to stick with known parties will mean taking on new investment and debt will be tougher. Those that do happen will require a greater demonstration of professionalism and track record, problem-solving aptitude in the team, and strong sense of location and product matching, with strong ability to show the ‘working-out’ and recognition of post-pandemic adjustments.
The greater pressures on experience, profile, team, and skin-in-the-game I feel will drive a strong demand to provide creative deal structures, mitigating or delaying land value payments where possible. For some incredible creative deal structures, read an unknown book called ‘The Philanthropist’s Tale’, by Dr Laurie Marsh, who was one the biggest London developers in the 60’s.
Anyway, partnering up with experienced contractors or larger developers should be, in my view, an absolute top consideration, no matter the experience or size of developer or investor. This will not be a year for ego or ‘way we’ve always done things’. Think Urban Splash, think Berkeley Homes, and the various deals they’ve done in collaboration with landowners and other developers. I strongly believe this mindset will serve part-time, micro and small developers well in 2021.
Deals should be available in abundance, especially as we see commercial and retail spaces come under strain from voids, so there will no shortage of conversion or redevelopment opportunities. Looking at exit values conservatively and working hard at relevant comparables when taking often untraditional conversion space, especially retail, should be time well-spent, and not assuming wide-buyer markets.
At TrustedLand, we will be concentrating on making sure developers are well-presented and positioned to stakeholders, and that investors have a clear, comprehensive view of what they are getting involved in. Within Real Developer, we’ll be taking on thirty new small developers with a minimum of two completed sites track records for a special profile and promotion programme, email email@example.com for details.”
Co-Founder of Partners in Property & Partner at National Property Auctions, Adam Lawrence
“After an incredibly volatile year in 2020, but ultimately an up-market (against all odds), the only certainty is that the uncertainty will continue well into 2021. We have constantly seen revised unemployment figures and predictions, doomsday predictions from “pub economists”, and now in the mixer we have a Brexit scenario hanging in the balance as the “Great White Hope” Mr Johnson proceeds to Brussels to try and do a deal at the 11th hour.
It almost feels as though this script was always set – but perhaps I am too cynical. The markets are betting on a last-minute deal of sorts and so am I, I believe the posturing to be exactly that – the longest peacocking on both sides of any scenario in recent history. The market likely to be most sensitive to this news is London, without a doubt, in the near-term. London needs to be parsed at the very minimum into prime, inner and outer – prime was the one taking the brunt of the Covid hammering in 2020 and saw rents sinking like stones as it was no longer necessary or important to be particularly near an office that you didn’t go it, or couldn’t go to. Some of that change is of course permanent, some is only temporary. How much? We don’t know, but even a 10% drop in office demand and resultant rental demand goes a long way to ease the long-term pressure upwards on unaffordable rents in prime London.
As travel returns in 2021 and serviced accommodation pops back up, tens of thousands of units will again leave the AST market and go back to providing short-term accommodation, with limited regard for the 90-day rule (or use the loopholes for longer lets to get around it). This sudden supply constriction will impact rents on the upside again in prime and some of inner London without a doubt.
City centres throughout the land will struggle on the basis of lower office utilization and the issues that are faced by prime, above, will be replicated in all the metropolitan hubs in the rest of the country. Alongside leasehold issues becoming more and more common and sales falling through on the back of this, throw in the unfolding cladding situation and you have a really horrible market ahead for city centre flats in my view. Especially given how very many of them are in development in cities like Birmingham, Manchester and Leeds – in at least 2 of those, supply was already far outstripping demand as far as the pipeline goes, and that was PRE-Covid. So there are major issues there.
The flip side of the losers in the city centres will be the suburbs and to a smaller extent the seaside towns, for 2 reasons. 1) The perceived safety of the suburbs appeals more than it ever has done before, as does a garden! 2) Second homes are now firmly back on the agenda. Much of the upper-middle class, and the top 10% income earners in the UK have not suffered particularly from the Covid crisis – and as such, with Jeremy Corbyn a distant memory, and longer weekends and working from home a much more palatable and realistic proposition, the attraction of a second home is likely to take off again from a surpressed position back from 2018 or so when a possible second homes tax or similar looked plausible.
My expectations are a year of volatility, and an almost flat market. There is an arbitrary nature to these predictions of course, and this is not a good year to use as a baseline – but my overall attitude
to pricing in 2021 would best be described as up and down, but ultimately sideways by the end of the year.
Much of course remains predicated on Stamp Duty and what will be done when the holiday ends (and indeed, when will the holiday end?). Will there be a reform? Mr Johnson is a long time critic of the SDLT system and may well have tasked his Chancellor to come up with some reasonable reforms. I see either a 50% reintroduction (rather than a full one) or a reform of the banding as the 2 likely outcomes before 31st March, rather than an extension of the holiday.
A sideways volatile market will favour the dispassionate and those who invest on fundamentals. Just as retail is at crisis point with us close to a bottom in the new year I would think, around Q1s rent day, there will be opportunities for those who can bring things into the 21st century. Death of the high street? No, but evolution is both inevitable and has been massively sped up through Covid.
Differences and development opportunities for out of town shopping centres? Certainly, and this will be another area of evolution seeing, I believe, commercial, residential and retail coming closer together on some of these sites to secure their future. Multi-purpose (including hotels) will give this a shakeup, but massive investment is needed in uncertain times, and those are not happy bedfellows.
A good year to be sensibly geared on fixed-rate products that are not onerous or overly risky, although any base rate linked products are also very attractive for the next 3-5 years I would think as the forward guidance and market suggest basically zero rates for that period at least. Doing nothing will become more expensive as inflation rises and zero-risk rates of return are zero. Covenant strength in social housing and LHA-linked tenancies I expect to continue to grow and become the real niche growth area of the year as far as resi is concerned. There will also be a huge rebound for hospitality and leisure, for those businesses that do manage to hold on, as the world seems champing at the bit to remove the shackles that Covid has placed on our weekends, spare time and social lives!”
Founder and Proprietor of The Property Chronicle, Stephen Yorke
“I think by the 2nd quarter of 2021, there will be a creeping realisation that we are at the foothills of a two-year boom in real asset prices. Any asset that has continued to deliver reliable income through 2020 will trade at a very low cap rate.
I doubt very much there will have been any distressed sales by funds that had to close to redemptions in 2019/20. In fact, the opposite, by the second to third quarter of 2021 we’re likely to witness these same funds seeing big net inflows.
At the same time that the underlying assets rise in value so will the value of any business that generates a fee from managing them. The big boys are going to start deploying cash to buy income streams. So, in short, I see a boom for asset prices and a boom for those that manage them too. Steep yield curve anyone?”
Tax Technical Manager at Optimise Accountants, Simon Misiewicz
“They have been a number of legislation and tax changes in 2020. There does not seem to be a let-up with EPC and capital gains tax changes on the horizon.
One thing remains. People need to rent homes. Not enough homes are being built. Demand will exceed supply in due courts and rents will increase. Professional landlords that invest in the right tax structure and adapt their business to stay ahead of legislation will be in a very good place to make money from their property investments.
2021 will be another year of change. As will be the greater number of opportunities given the landscape of an ever-increasing number of empty shops and offices, which may be converted into residential dwellings. This will be the direct result of business and social changes to the way that they decrease their use of commercial properties since COVID19
Money is to be made by professional landlords.”
Chief Policy Advisor at the NAEA Propertymark, Mark Hayward
“Both the sales and rental markets have remained remarkably resilient throughout this trying year, despite market closure between March and May.
The prioritisation by the government of a functioning property market and subsequent implementation of the stamp duty holiday as well as measures taken to keep the rent flowing within the private rental sector has allowed for record-breaking levels of house sales and rental accommodation.
“We are confident this boom will continue through the new year but grow increasingly concerned about the impact of the stamp duty cliff edge on 31st March 2021.
This cliff edge has already increased pressure on service providers within the industry, causing delays for buyers and sellers, and could cause thousands of sales to fall through at the final hurdle as buyers realise their sale will not be completed ahead of the deadline.”
Chairman at the National Residential Landlords Association (NRLA), Ben Beadle
“The new year symbolises a new beginning, and while nothing is certain we hope the country can get back to some form of normality over the first few months of 2021.
This is not to say there won’t be challenges. Many landlords have gone the extra mile to keep tenants in their homes throughout the dark days of the pandemic, but some are now struggling to keep their heads above water themselves.
Data shows landlords have lost up to £437m so far, and in 2021 we will be continuing to campaign for a comprehensive financial package from Government to support the sector and allow tenants to pay off rent arrears built as a result of the pandemic.
The Covid-19 crisis put back many of the legislative changes we were expecting to see in 2020, but as 2021 progresses we expect to see some movement, not least on the Renters’ Reform Bill, which will see the Government abolish Section 21 repossessions.
We will be working alongside the Government to ensure that its replacement is a fair system that works for and protects landlords, with our own vision of what changes we would like to see launched this year.
We could also see movement on deposits, with the introduction of a new ‘lifetime deposit’ proposal a key promise ahead of the last election, and a flurry of activity in the wider market ahead of the end of the stamp duty holiday in March.
As we enter 2021 we will continue to help and support landlords through these most unprecedented times and campaign for positive change.”
Chief Executive at Shelter, Polly Neate
“Over a quarter of a million people – half of them children – are homeless and stuck in temporary accommodation. This should shame us all. With this deadly virus on the loose, 2020 has taught us the value of a safe home like never before. But too many are going without, because of the chronic lack of social homes.
“Many people spend the winter in grim, dangerous places, cut off from loved ones and faced with a daily struggle to eat or keep clean. As the country continues to reel from the financial shockwaves caused by the pandemic, our services will do all they can to support those battling homelessness. 2020 was unbelievably tough, but with the public’s generous support we will do our best to give hope and help to everyone who needs us.”
Heading of Housing at Crisis, Chris Hancock
“The impact of COVID-19 on the PRS market accessible to people in receipt of Universal Credit has actually led to an increase of properties available at the Local Housing Allowance (LHA) levels. The Chancellor’s decision to raise Local Housing Allowance back to the 30th percentile of market rent levels has significantly helped with that plus the impact on other lettings, especially Air BnB and students lets.
For example in Edinburgh our services have seen a huge shift, pre-pandemic, we would see roughly 23-35 properties affordable to people in receipt of LHA in Edinburgh weekly, whereas there are now 400-500 at least (not counting HMOs) so that does suggest an increase from 3% to 30%+. We have seen similar, if not quite as dramatic, shifts in other cities.
Looking forward to 2021 we now know that LHA will remain at the 30th percentile but it will not increase from April 1st 2021. An argument could be made then that if rents fall as expected, LHA being fixed should make more of the market accessible to people in receipt of LHA. However, we know from direct experience that the LHA PRS market does tend to operate as a distinct entity with landlords linking their rents to LHA regardless. Coupled with the dramatic rise in demand for more affordable PRS properties from people impacted by a loss of work it is not clear whether this could lead to a levelling up of the PRS market.
Specifically on homelessness, the Everyone In approach which saw 15,000 people brought off the streets in England at the start of the pandemic was perhaps a missed opportunity to use the increased spotlight and public awareness of homelessness to make inroads into the PRS.
A national rent deposit scheme where private landlords looking for tenants could use a single point of access with one consistent and clear offer from a partnership of national and local government and the third sector would, in our view, play a key role in helping make the PRS a viable route of homelessness.
There is still an opportunity to do this in 2021, and look to replace the myriad of different local initiatives, which do fantastic work, but are competing with each other in a way which is confusing for landlords and ultimately self-defeating of what we all wish to achieve.”
Director of Property Investments UK, Robert Jones
“Wow what a year … With many in January early this year predicting a buoyant market, the curveball thrown was not anticipated and will have an impact for many years to come. The wide-reaching changes I believe are still yet to be seen.
In the short term we have seen and likely to continue seeing buyers and sellers push to get transactions completed before the stamp duty deadline. But will that burst of activity continue? It’s clear the housing market is central to the government plans as their stimulus throughout 2020 to keep this part of the economy open and trading has been very welcomed, but as the date comes ever closer sentiment is certainly uncertain and once this deadline passes will transactions drop off a cliff edge?
With the government clearly wanting to see an active housing market, with so many affected from the supply chain through to a range of companies and industries involved in the selling and buying process, transaction volumes need to be kept up in the housing market, personally, I think we will see some continuation of government stimulus specifically across the housing market for this reason, until the economy starts to find its confidence again, which may start as vaccinations trickle through.
In the medium term, however, it’s now very clear that we need sweeping changes to many parts of the housing system. To encourage and support, efficiency, and speed. When the whole world can be turned upside down in a matter of weeks. Any system that turns like an oil tanker is in trouble.
Planning is the cornerstone to these needed changes, The high street has changed forever. But it can’t be forgotten and it is the hub of many communities. Simply letting it disappear is not an option and people, companies, industries need flexibility and support to help our towns and cities thrive again.
Communities need to be able to adapt quickly to changes and a system that requires months of preparation and waiting with wild uncertainty can’t be fit for purpose. Planning has a big chance of reform in 2021 to give business owners and housing developers a clear path to help redevelop and grow housing stock and our communities.”
Founder and Director at Landlord Action, Paul Shamplina
“Having just had the most unpredictable year, it really is difficult to say exactly what 2021 will bring!
Demand in the UK housing market has seen record activity driven by the stamp duty holiday on properties up to £500,000 and pent up demand following the Nationwide lockdown, which subsequently drove people to seek a change in lifestyle.
I think the market is likely to plateau next year as the country readjusts, but if the stamp duty holiday is not extended, or a tapered reintroduction applied, then activity could fall off a cliff.
In the rental market, I believe the six-month notice period for possession, brought in as part of the Coronavirus Act 2020, is unlikely to be reversed at the end of March and is most likely here to stay. The Government is adamant that the abolition of Section 21 is the right direction of travel. Now, we must wait to see how more permanent changes will benefit tenants whilst retaining landlords’ ability to repossess where there is legitimate reason to evict, for example anti-social behaviour or non-payment of rent.
Unfortunately, the delays to the eviction process will continue throughout 2021 driven by the backlog of cases and the expected surge in evictions next year, which could hit 150,000.
There are still plenty of reasons for landlords to remain optimistic as tenant demand remains strong and news of a vaccine should help improve sentiment as we tiptoe towards normality. There will be opportunities for landlords and investors as more companies reduce their office space or adopt a more permeant move to remote working.
I think the demise of the high street will see increased use of Permitted Development Rights as investors diversify their portfolios. Some landlords may also consider moving into the social sector to lock in 3-5 year contacts with guaranteed rent.
Other considerations for landlords next year will be Brexit and how this impacts landlords’ requirement to check their tenants’ “right to rent” and immigration status. Currently, EU citizens are considered in the same way as UK citizens but this could change after Brexit.
Finally, landlords await Chancellor Rishi Sunak’s Spring Budget which it is thought could bring a potential hike to capital gains tax. If this goes ahead, we could see a flurry of landlords trying to sell up before it comes in, which could drive prices downs. But of course, landlords who were thinking of selling, but cannot sell in time, will hold on to their properties. There has never been a more important time for landlords to seek specialist tax advice and get their tax planning in place.”
Partner of Stewardson Properties, Phil Stewardson
“The Times recently reported the average UK homeowner made more money from their home in the first ten months of 2020 than in the preceding three and a half years. Savills calculated that in the first ten months of this year the average home gained £12,599 in value compared with £10,359 gained in the preceding three and a half years.
Post lockdown so much pent-up demand was released & people desperate for lifestyle changes went crazy to get the extra bedroom or a garden. As an investor, the market has been very difficult, however since the beginning of December 2020 the tide has started to turn, agents are calling us now to ask If we are still interested in sites we offered on in September & October, the sales are stalling and they are returning to the market.
We believe the market in Q1 2021 will slow, but it won’t be until Q2 that we start to see prices fall, the end of the SDLT holiday, combined with the end of furlough will bring a rise in redundancies and fewer buyers.
We operate across 2 different geographical areas, the West Midlands & The North West. We have the confidence to continue buying in both areas however we are very specific and have niches within these areas, by the end of 2021 we fully expect prices to have fallen by 5-7% nationally and the market to remain challenging until the end of 2022. As prices start to fall, lending will tighten and bargains will return, we expect that to be an ideal opportunity to grow our portfolio further.”
Head of BM Solutions, Phil Rickards
“When putting together my reflections on 2019 this time last year, I summed up by suggesting that the mood amongst lenders is cautiously optimistic for 2020 as the various tax changes will have fully bedded in – but we’ll just have to wait and see what the year holds. Looking back, like most of us, I had no idea what 2020 had in store.
Whilst the tax changes have settled in and we’ve seen no real evidence of landlords pouring out of the sector – as some commentators suggested, without stating the obvious, it’s been an incredibly challenging year for everyone in the market.
The first few months of the pandemic were a difficult time for the mortgage industry, with a virtual closure of new lending markets as valuations had to be put on hold in particular. At BM Solutions, the safety of our staff is paramount and with several processing offices having to close and strict social distancing requirements being put in place, the enormity of the challenge became apparent very quickly.
We had to get our team set up to work from home as quickly as possible, including providing them with the right kit and enabling them to process mortgages remotely, not an easy job when this was not the usual way of working. We also needed a solution to the valuation challenge as surveyors were obviously unable to visit properties for mortgage valuation purposes. We set up systems to value as many properties as we could remotely, fully utilising technology wherever possible.
All of this worked, and although our mortgage processing times were longer than we would want and it was taking longer to answer phones, we were open for business and it wasn’t long before we were starting to process record amounts of applications. We’ve also seen significant activity from landlords switching their existing BM Solutions mortgage to another rate when their current rate comes to an end. If you had asked me at the start of the first national lockdown back in March, it would have been hard to imagine this being a reality.
Taking stock of the year, it’s clear that the Stamp Duty Land Tax holiday announced by the Government as part of a package of initiatives aimed at stimulating the economy has made a big difference. BM Solutions has seen a large increase in BTL purchase mortgages since the change and in particular Let to Buy where customers convert their existing residential mortgage into a Buy to Let, raising capital in many cases for the onward purchase.
Looking ahead to the New Year, it could be a quieter year overall in terms of mortgage lending following the release of pent up demand and stamp duty deadline impending, but I’m sure landlords will still be keen to make sure they are getting the best mortgage rates available. That’s why regular contact with their mortgage broker will be more important than ever. The biggest challenge for mortgage lenders in the first quarter of 2021 is likely to be completing as much of the pipelines of mortgage business all in need of completing by the end of the March cut–off. It’s going to be a big job but we’ll be working as hard as we can to get off to the best start in 2021.“
Associate Director of L&C Mortgages, David Hollingworth
“This time last year no one would have anticipated what lay ahead in 2020. The rollercoaster ride created by the pandemic is perhaps not over yet and the resulting uncertainty that persists makes it even harder to forecast the outlook for the market next year.
Much will depend on how the economy emerges from the shadow of the pandemic. Certainly, lenders have been careful to ask questions around the impact of coronavirus on borrower income. However, the hope will be for the vaccines now being rolled out to accelerate a return to some degree of normality, which should help boost confidence.
There will be a strong focus on the end of the stamp duty holiday and the impact that the end of the incentive could have. Certainly, it looks likely to build pressure in the market as buyers look to complete before the end of March. The expectation will therefore be for continued strong activity in the first quarter.
The question will be whether the cliff edge approach will serve to bring forward purchases, only to see subsequent activity levels ease. Progress on the easing of restrictions could make a big difference and reduce that potential impact.
I noted last year that although the decision to leave the EU had been reached there could still be uncertainty stemming from the trade deal negotiations. At the time of writing that still holds true.
However, mortgage rates remain extremely low and that looks unlikely to change, which should provide opportunities for landlords, whether they’re looking to add to their portfolio or to keep existing costs down. That should spell good news for those landlords that purchased property five years ago to beat the stamp duty surcharge on additional property and could now be coming to the end of their current fixed deal.“
David Hollingworth @LandC – Associate Director, L&C Mortgages
Real Estate Valuation Theurgist, Nick French
“As Heraclitus wisely said in a world long before Covid (or any other pandemic), “Change is the only constant”. And it is fair to say that for many, if not most, 2020 has been an odd “change” and definitely not one of the best years of our lifetimes. On a personal level, there has been tragedy, hardship and sacrifice. On a commercial level, the stop-start economy has made business difficult or terminal. And on a spiritual level, all of us have had time to reassess what is important. But, the overriding determination of the last 12 months has been an acceleration of change in everything. A change that will not go away with the vaccination.
Indeed, I am sure that the theme of many of these musings shared on this website will be that Covid, and the restrictions that have flowed from it to slow its spread, will be that “the pandemic has acted as a catalyst on all markets” and this has impacted on the use and value of the underlying property assets (both negatively and positively depending on sector). Retail has changed; the importance of offices has changed; the use of logistics has evolved and the importance of space to live has usurped the notion of location, location, location. Property markets have changed.
And all of this has happened in less than a year. Things that would have, pre-covid, taken years to come to fruition have been expedited almost overnight. The best example of this is the high street where numerous traditional retailers have fallen as their business models were shown to be lacking in the new digital economy. It wasn’t covid that put them into administration it was their lack of investment away from a “bricks and mortar” model of retailing and their slowness to embrace change. A slow lingering demise was turned into a brutal economic cull.
It is interesting that while the newspapers and internet blogs lament the failure of these stalwarts of the high street, if you dig deeper, the same commentators admit that they didn’t shop there. That fact might have a correlation to their closure.
As I wrote in the Property Chronicle in March of 2020 (prior to any impact of covid), “it isn’t just the large defunct or struggling national retailers that are disappearing, it is also the small independent traders who simply don’t offer the buying public what they want to buy. …. if a use of a property doesn’t make money, it will change to a use that does”. And that is what will happen. The high street will change and, if the planners allow that change to happen, it will evolve and thrive again in different uses.
Again, it is not a coincidence that the high street failures are mirrored by the success of online shopping both in terms of sales and the need for logistics. Amazon and other home deliveries have all boomed during the pandemic leading to a higher demand for the space and properties that support their business model. Indeed, overall retail sales are higher in 2020 than in 2019. So retail isn’t dying, it is the way that we shop that has changed.
Likewise in the office sector, offices will be used less but not so little as they will die. Home working or hub-working will sit side by side with days at the office or offsite meeting points. Zoom and Teams will be part of the world of communicating alongside the telephone, emails, letters and face to face meetings. If you will pardon the pun, what will work will work. Again, it is an accelerated change. And whilst any change is frightening, it will happen and there will be winners and losers. The trick will be to make losses into profits. I have already been talking to investors who have seen the current situation as an opportunity to convert office locations in to high end spacious residential properties.
As Ricardo said, property (land) is just a factor of production. The next decade will be a period of change; an opportunity to embrace different needs and uses. The skill of the property professional in 2021 will be to manage that change.
So what are my actual forecasts for the property world over and above the continuing changes noted above? Well, go back to my forecasts for 2019 because, oddly, one of the major impacts of covid has been for all other aspects of the market to be put on hold. My forecast for 2020 pre-covid was:
“My career in property has taught me that markets shift and change constantly so the blip of certainty in the sea of uncertainty is nothing unexpected but something tells me that the impact of climate change (or more correctly the interventions needed to try to slow its progress) on world markets isn’t yet being priced into current yields and rents”
And this view has not changed. The biggest factor to affect property markets in the next 10 years will be the need to address climate change through the mandated increase in the energy efficiency of buildings. That need hasn’t gone away. Admittedly, the UK government has yet to announce (as I write, December 2019) what the new rules and regulations of Minimum Energy Efficiency Standards (MEES) will be for the next decade but, whatever they decide, it will be far reaching for both residential and commercial properties. This is the iceberg for 2021. BREXIT will be the equivalent of moving the proverbial deckchairs.
Let’s hope that 2021 will be a HAPPY NEW YEAR.”
Nick French – Real Estate Valuation Theurgist and Property Educator
Property Investor and Podcaster, Tej Singh
“Well, what a year 2020 has been, who could have predicted it? Well, apart from those that apparently did! Fake news is everywhere, prices have gone up, interest rates have gone down, people are still buying like crazy. At least Trump is going I think 2021, at least at the start will continue this until the Stamp Duty Holiday ends, and when Furlough ends at some point. Lenders at the moment are prioritising purchases over remortgages, so people can get in before the aforementioned holiday.
Brexit is impending and that will have some sort of impact, along with the general market turbulence we face. Perhaps a vaccine (with not much safety data!?) could rescue the economy and markets, and return us to normal? This would certainly spell good news for society, and for our mental health. I am really unsure as to where the property market will head next year, it’s so unpredictable with the government changing their COVID-19 policies so often without much warning.
I don’t see a crash, or a mass-repossession event, I think the inflated prices of Q4 2020 will return to the normal in 2021, and rest at a slightl YoY increase in the first quarter. I haven’t purchased for about 6 months, I’ve struggled to find any deals at a reasonable price. I think this will continue in line with the BoE negative interest rates, and people throwing money into Property as a ‘safe asset’ thereby increasing the prices at the moment. 2021 will be an interesting year, as always there are opportunities but two key things stick out for me:
Buying at profit – ensure your purchase price sets you in a good place from day one.
Multiple exits – having a deal that can be safely exited in a variety of ways is vital to protect your investment.”
Director at Network Auctions, Toby Limbrick
“If I had one word to describe the impact of Coronavirus on the auction market in 2020 it would be “seismic” because the shift from room to online would have taken years without the catalyst of the national lockdown.
Going forward, I expect some auctioneers will return to their default setting of room auctions but for Network, the nationwide spread of properties in our catalogs makes us a perfect fit for online auctions. The convenience of the process means we engaged far more bidders per lot this year resulting in better prices for our clients which is obviously our primary objective.
While the UK economic outlook is uncertain as we recover from the impact of the virus I am confident the combined factors of pent-up demand and low-interest rates will underpin a buoyant property market in 2021.”
Director of the Buy-to-Let Broker, Matthew Rowne
“The fallout from COVID has impacted many, many people from a personal perspective, placing a huge burden upon our NHS and people’s mental health, in many respects stealing a period of our lives we will not get back. Although this is potentially not the platform for that to be discussed, it is important for business (especially the mortgage industry, where traditionally so many businesses were founded on face-to-face sales), to embrace change, and understand the importance of an antifragile robust business model.
Moreover, we all need to recognize the commercial advantage to be harvested through the embracing of technology and successfully anticipating the behavioral changes of both clients and potential clients post-COVID.
For the majority of businesses and industries, it has been a year to forget but despite the huge commercial impact it has had across much of the commercial spectrum, in the mortgage world, especially those who have remained agile within the specialist lending sphere, have remained incredibly buoyant. Indeed for those brokerages that have been pioneers of a technology-driven approach, and remained agile in their proposition, have been able to steal greater market share.
During these testing times, at The Buy to Let Broker, we have actually continued to recruit to deal with the increase in demand for specialist services, whilst maintaining our benchmark in respect of service levels, and ensuring that we continue to retain our platinum Feefo ranking.
When looking at 2021, the important thing is to try to establish what the main drivers are causing the biggest activity within our sphere of the property market, and critically whether these stimuli are likely to continue into next year. Indeed how clear is the commercial vista for the mortgage market in 2021? (From my perspective I will focus specifically on the specialist mortgage market).
The huge volumes of business that we currently transact are actually down to a myriad of factors…
The most obvious is the Stamp Duty Holiday, which has not only encouraged people to purchase property but has encouraged anyone thinking of buying/investing over the next 18 months, to try and do this before the end of March due to the (potentially perceived) huge saving in SDLT. I say potentially perceived, as one would have to rationalize that this saving in Stamp Duty tax, (has in some part at least) been off-set by the increase in purchase prices such a surge in demand has created.
In theory this Stamp Duty holiday below £500,000 is due to expire at the end of March, and at this stage, we have to assume that this will be the case. However, there have been murmurings from many credible sources, that there is at least a reasonable chance that this SDLT ‘holiday’ will be extended. There has also been lobbying of the Government for this from within the industry itself.
Only last month, in response to a question in the House of Commons, Housing Minister Christopher Pincher told MPs: ‘The Government does not plan to extend stamp duty relief, and will continue to monitor the property market’. Therefore, at this stage at least, a suggestion of an extension is conjecture, but in such unprecedented, economically challenging times, with the double whammy of a commercial fallout from Brexit to consider, it is reasonable to assume that the Government would at least be likely to consider this as an option. Indeed, the UK Government has a history with respect to trying to use the property market as leverage for the general economy.
If this tax holiday is extended, then for the motives alluded to above, personally I would not expect this to be announced until as close to the deadline as possible, as it would be reasonable to expect the Government to wish for the hive of activity in the housing market to continue (whereas an early announcement could potentially cause this demand to quell somewhat, especially in the immediate term).
Accordingly, I think we will see the continued wave of demand as the Stamp Duty expiry date of 31 March encroaches, with lenders continuing to increase rates as a tool to control demand/service levels. This will most likely level out from April, with a slightly less frenzied market through the rest of the year as this tax incentive either ends or is extended, (and potentially some lenders decreasing rates again as the current need for controlling service levels is replaced by the desire to price competitively and compete for market share).
The huge media coverage surrounding all matters COVID has stolen front-page coverage from Brexit, but of course, regardless of what happens in respect of Stamp Duty post-March, Brexit will have a huge impact on the long-term economic and indeed the housing market. Despite the mess, some feel our Government has made in respect of Brexit, and specifically, in its attempts to make a deal, there will inevitably be pro’s and con’s to our exit from Europe, most of which have been discussed and debated relentlessly over the last few years. Indeed at the start of this year, Brexit jitters posed the biggest threat to house price stability, with the possibility of changes to the Bank of England base rate and no-deal after the Brexit transition period bringing a level of uncertainty to the market.
When considering the potential impact of Brexit, it is important to at least consider the longer-term trends. The rate of house price growth actually decreased significantly in the year after the referendum everywhere in the UK except Scotland, (which remained relatively flat). Two years on, by June 2018, year-on-year price growth had improved in every UK nation except England. By June 2019, with Brexit fast approaching, the rate of growth had slowed across the board to a UK average of 1.01%. Fast forward and data (for June 2020) showed annual house price changes have now settled at around 3% across the UK. However, this complex picture shows how difficult it is to draw a direct link between Brexit and house price activity.
With mortgage rates remaining competitive, borrower affordability and confidence remain strong. However, there remains limited mortgage availability for those with smaller deposits as a result of lender capacity issues, (and a degree of lender caution around how the economy will emerge from the impact of the pandemic and Brexit).
In summary, the recovery from the pandemic carries an uncertain outlook and any disruption from Brexit could still add to that uncertainty. However, from what we have seen is that investors have remained confident during a pandemic and continue to take advantage of low mortgage rates. They can also fix those rates in order to protect against any potential future fluctuation and many have taken the opportunity to lock into low longer-term fixed rates now.
The end of the transition period may have an impact on housing demand. However, if only to emphasize the difficulty in predicting at this time, there are conflicting market forces at battle here. I do feel that if fewer EU nations see the UK as an attractive place to live this may reduce demand at the margins of some markets. However, this is somewhat countered by my belief that if it increases market uncertainty, then many more investors may turn to “safer” bricks and mortar for their investment.
Looking rather more specifically at the specialist lending market, limited company lending, HMOs, MUFBs, and indeed even holiday lets (we assume in anticipation of more families choosing to holiday within the UK for the foreseeable), have remained particularly buoyant, as the complex sphere of Buy to Let continues to thrive.
As the socioeconomic pressures surrounding the PRS continue to a crescendo, it is abundantly apparent that professional, committed, landlords will almost certainly be in greater demand than ever before. Although a major factor, this is not only required to serve the exhausting housing needs of the expanding UK population but also our evidence would very much suggest, to provide a protective umbrella for the Government.
We have always remained aware that we see significant bias in our data compared to some of the ‘standard’ brokerages, (such as the concentration of committed/professional landlords amongst our established client bank, and indeed reflected through our daily new inquiries). i.e. Whilst those smaller ‘dinner party landlords’ who had not been shaken out of the market over the last five years, may now be reticent to re-invest and prefer a period of analysis and taking stock, professional landlords will invariably see this economic uncertainty as an opportunity to purchase competitively priced stock, and as such, potentially obtain stock at prices that enable marginally improved yields.
Considering all of the above in context, with the forensic underwriting required pre-application these days as we look at the recent volatility of clients’ income in many cases (volatility caused by the pandemic), and in some cases commercial /forensic analysis of any Government assistance, there is a myriad of ways a specialist broker (whether you use ourselves or one of the handfuls of other HNW specialist brokerages in the UK), should be able to add significant value to landlords property business. It is ever more imperative that as brokers we try to look at any client’s circumstances placing emphasis on a case’s individual merits, rather than apply a binary stance.
It would be ignorant to just highlight the success of our sphere of the market in isolation when so many around us are struggling. But I sincerely do believe that the modern landlord provides a significant comfort blanket too much of society in a period of uncertainty, whilst providing huge value to those most in need of shelter. Certainly, on a basic level, landlords continue to provide much-needed financial contributions to the Government’s coffers (recent estimates are that Buy to Let investors contribute north of £16 Billion into the UK economy annually).
All of the above, from my humble perspective, suggest 2021 will present wonderful opportunities for TBTLB and other specialist brokerages/lenders that are committed to technology and the specialist sphere of the market.”
Matthew Rowne @BuytoLetBroker – Director at The Buy to Let Broker
CEO and Co-Founder of FJP Investment, Jamie Johnson
“I am cautiously optimistic about 2021. After all the uncertainty caused by COVID-19, news of a vaccine shows there could be light at the end of the tunnel. What’s more, the property market has been alive with activity ever since Chancellor Rishi Sunak announced the Stamp Duty Land Tax holiday in early June 2020. House prices have been rising at an incredible rate, and this is off the back of robust market activity driven by domestic and international demand for bricks and mortar.
According to Halifax, property prices have risen 6.5% between June and November 2020. This is an impressive observation when compared to the capital growth of other assets and the general market uncertainty investors are wrestling with. And even with Brexit casting a shadow over 2021, there is nothing to suggest that buyer demand will slow down anytime soon.
The property market is in a strong position, and I believe the government will do everything it can to encourage capital flows and the completion of sales. The fact that the government has already committed to investing significant amounts into new-builds and infrastructure is a reflection of this realization. Naturally, the commercial property faces a different set of challenges given the rise in remote working. However, I believe that the commercial property market will simply evolve to meet the new set of market demands.
After all, 2020 has demonstrated the resilience and strength of the real estate sector as a bedrock of the UK economy.”
Founder at PropTech Reviews, Paul James
“Wow, who saw 2020 coming? Obviously it’s been a massively unusual year and shows just how hard it is to predict anything!
We all hope that 2021 is going to be steadier, but the truth is, there are still loads of unanswered questions. At the time of writing, it’s still not known what kind of a deal we’re leaving the EU with, if we get a deal at all. The stamp duty holiday is still due to end in March, but there is still a possibility it could be extended. Plus, there’s a vaccine being rolled out but no one quite knows how long it will take and how soon we’ll return to ‘normal’.
Each of these things has the potential to massively impact the housing market, making any predictions almost impossible!
So let me start by making predictions on each of these events…
First, I think we’ll leave the EU with some kind of deal. It may not be the best deal for everyone, but it will be at least some kind of deal. That will help to steady the ship in the housing market and ensure we avoid any significant loss in confidence that a no-deal Brexit has the potential to cause.
Secondly, I don’t think the stamp duty holiday will be extended. It just doesn’t make sense to simply ‘move’ the problem. Instead, if anything, I think we’ll see a compromise. That could be an extension for properties that have already agreed a sale but not yet completed. Or, it could take the form of a stamp duty reduction rather than a pause. Or we may end up with nothing. I’m therefore going to assume that whatever happens here, it won’t significantly change the fact that there’ll be a fairly sharp slowdown in activity as we reach the end of Q1.
Finally, I think by early summer we’ll all be returning to some form of ’normal’. It won’t be quite life as we know it but it’ll certainly be a lot closer than where we are now. That will give people confidence and help to undo some of the damage we may potentially see from the stamp duty holiday ending and a no deal Brexit (if it happens!).
So, a bit of a mixed bag in store for 2021 and perhaps another rollercoaster ride, though hopefully a less erratic year!
Overall, I think we’ll see a gradual market slowdown, particularly as the economic crisis takes hold more firmly. It’s going to take years, possibly decades to recover from the events of 2020 but I think the market will remain relatively robust despite the challenges.
One positive from 2020 is the innovation and uptake of PropTech solutions to help deal with the crisis and the multiple lockdowns. I suspect we’ll see that trend towards utilising more PropTech solutions continue well into 2021 and beyond. This year may have been the trigger that many agencies needed to finally take the plunge and embrace new technology.”
Founder and CEO at Bamboo Auctions, Robin Rathore
“What a year 2020 has been. None of us could have predicted the arrival of a global pandemic, and 2020 will be one that lives in the memory for a generation – sadly for mostly the wrong reasons. One thing that has changed (for the better in my opinion) is the property industry’s increased appetite for and uptake of technology.
Virtual viewings that were initially used to navigate lockdown are now here to stay and have quickly proven their worth, both in convenience for buyers and sellers and efficiency for agents. Video consultations and market appraisals have also been more widely used. Online auctions have almost entirely replaced traditional ballroom auctions and have demonstrated their worth as a more convenient way for buyers and sellers to purchase property easily, with confidence and security. In 2020 alone, around £100m worth of property was transacted online using Bamboo’s technology.
I believe we are entering an auction market in 2021 and the agents we work with tend to agree. Most agents are doubling down on auctions and others are establishing new online auction services to make sure they are ready for demand. Speed and certainty of sale are going to be necessities in 2021 and private treaty often doesn’t cut it.
The challenges of 2020 still remain for 2021 – Brexit, an ill-founded lack of apathy towards landlords from government and general government inertia around house building. Add to that a rising unemployment rate and high levels of borrowing, which no-doubt will be repaid through increased taxation and 2021 could be a tricky year for some. What is needed is a commercial, forward thinking, fast acting chancellor and housing minister, who can work together and get ahead of some of these issues and provide creative solutions that give confidence to the market.”
Director at Alan Boswell Group, Heath Alexander-Bew
“Here we are twelve months on from my last update and, at the time of writing, still no deal with the EU. On top of that, the world is dealing with the Covid19 pandemic both of which are impacting heavily on the economy.
However, within the property sector, it isn’t all bad news. Estate agents are extremely busy dealing with a surge of people wanting to purchase a property, due, in no small part, to the temporary freeze in stamp duty. However, another factor is the surge in people looking to relocate to the country, partly to remove themselves from the risks of Covid, but also as the idea of flexible working become the norm and ‘working from home’ becomes acceptable. The pandemic has proven that workers can be trusted to work from home and as businesses overcome IT issues they can appear to work seamlessly without the need to have everyone in the office. Here in Norfolk, there has been a big demand for properties, and prices in the area have risen above-expected levels as a result of this.
With homeowners leaving bigger towns and cities, this does create the potential for better rental properties being available, although rent prices may fall in some areas with the uncertainty in the jobs market. Only time will tell when the pandemic is over and life starts to get back to normal whether the high demand for houses in smaller towns and cities, as well as the country, will continue.
The pandemic has impacted the insurance market with increases in reinsurance and liability costs being passed onto customers by the way of higher premiums. Index linking has also risen sharply in recent months as demand for building materials out-strip supply. Some firms are stockpiling materials ahead of the uncertainty of Brexit and there are backlogs at British ports like Felixstowe. Goods are now being redirected to other ports which is increasing transport costs which is impacting the price of goods and whether they can be delivered on time.
The demand for products like landlord’s legal expenses insurance and rent guarantee insurance has increased significantly since the start of the pandemic as the risks to the high street and other leisure and hospitality jobs are under threat and unemployment continues to grow. The pandemic has seen insurers changing the cover and cost of rent guarantee policies as the number of claims rise significantly as well as the claim costs. However, landlords are adhering to the Government’s advice to engage with tenants that are financially struggling, and find a mutual agreement on what can afford which has helped to reduce the number of defaults. Unfortunately with the delays in evictions being processed by the courts until March 2021, most insurers are expecting costs to reach the maximum indemnity limits under the policy.
Overall I think 2021 will be a mixed bag of opportunity, a potential slump in property demand and prices once the freeze on stamp duty comes to an end, higher insurance premium, and continued uncertainty in the economy, until we get a trade deal with Europe and the pandemic, is under control.”
Co-Founder of Property Tribes, Vanessa Warwick
“2021 is going to be another very challenging year for landlords, due to continued uncertainty surrounding Covid19 economic fallout, increasing regulation, Brexit, and inability to gain possession of properties for a significant time.
In recent years, the pendulum has swung in favor of tenants, and landlords have endured continual battering from all sorts of headwinds, including onerous taxation. Now, the Chancellor is hinting at increased property taxes in 2021 to help pay for Covid19 support measures, so it seems the pendulum has further to swing, before reversing back towards a more favorable environment for landlords.
Judging by commentary on propertytribes.com, many landlords had enough and decided to sell up. Combine this with council housing waiting lists set to double in 2021, lack of new social housing being built, and first-time buyers struggling to get onto the ladder due to less choice of FTB mortgages and higher deposits needed, and you have a perfect “supply/demand” imbalance storm brewing!
For those landlords who can weather the on-going storm, there will be many opportunities.
However, to survive, all landlords need to professionalize their business and mitigate the many risks that have been massively amplified by Covid19.
Property Tribes is recommending that landlords take a “digital-first” approach, and, throughout January, we are running a themed month of content called “Landlord Digital Lives” where we will be showcasing digital products for landlords, and also talking to landlords who have embraced technology to find out how it has transformed and strengthened their business. This content series is being powered by our partners at LendLord, the portfolio management software.
I suspect the market will fall off a cliff when the stamp duty ends, but that represents an opportunity for landlords who are in acquisition mode. They should be able to buy at a discount from market value and lack of supply will at least make rents robust, if not increase them.
I also believe landlords should focus on quality houses in good areas with professional tenants, rather than less quality housing in poorer areas, as “quality” has proven to be more recession-proof.
Summary: Cash is king, operating with wider margins and a cash buffer, more robust tenant referencing, and professionalizing and optimizing your business are the name of the landlord survival game in 2021. Those that don’t will find it very hard to survive, so 2021 may signal the end of the “amateur” or “hobby” landlord”
Director at Searchlight Finance, Simon Allen
“How property lenders operate in 2021 is very much dependent on the health of the nation. With the various vaccines on the horizon, we should be in a better place with our personal health.
Due to Brexit, a new regime in the US, a pessimistic media, and a lack of political respect, our economic health won’t be as good in the short term. But we need to ignore this negativity as there is still a strong demand for quality developments and rental accommodation.
Lenders focus on two main areas when looking at their products.
Firstly, the price is linked to the risk of the client and property, and secondly how much money the lender has. I’ve said for many a year there are too many lenders, which from a borrower’s point of view is good as you should get competitive rates and relaxation of lending criteria.
Most lenders have access to plenty of funds and if valuers can get out, I can see plenty of choice in the finance market for investors and developers.
I’d like more innovation from lenders with less paperwork needed and more reliance on Open Banking, electronic signatures, automated valuations, and links to HMRC.
We all need tried and trusted professionals as part of our team and with the right support I can see a strong supply of finance in 2021 for investors and developers.”
Co-Founder at Property Solvers, Ruban Selvanayagam
“With positive news regarding the vaccine roll-out, industry eyes will be on how the housing market will react against a backdrop of potentially rising unemployment, end of the furlough scheme, Brexit repercussions, business interruption loan paybacks, the end of mortgage and stamp duty holidays amongst other factors that have provided a certain degree of stability over the course of the pandemic.
Although logistical questions remain with regards to how quickly the country (and the world) will be immunised, it has prompted a national sigh of relief and hope of a relatively sharp recovery.
Indeed, whilst the permanent damage to sectors such as hospitality and entertainment cannot be underestimated, unless there’s a significant change in circumstances (never say never!), we’re unlikely to see a repeat of 2007/08. Banks and lending institutions are well-capitalised and will be ready to lend (albeit somewhat cautiously) to the right kinds of borrower.
The chancellor will certainly seek out ways to shore up the economy and property investors / developers are likely to be a prime target. With changes to capital gains tax pretty much set in stone, it wouldn’t come as a surprise to see extra corporation tax burdens.
The sell house fast sector continues to gain a respected presence for homeowners in search of a hassle and fee-free property disposals. Here at Property Solvers, we’re now able to offer a suite of ‘quick sale’ solutions (including estate agency and auction options) and are actively seeking industry partners with excellent referral commissions on offer.