Our Property Investment Review 2020 looks at the year so far, and our predictions for property investment for 2021.
When 2020 started the economy was performing well, and property investors were looking forward to a year of opportunity and success. There were anticipated changes to taxation in the budget, but for the professional property investor taking the right advice, this was a limited issue.
Changes to Tax Liabilities
Since 2016 the Government has been phasing in changes to taxation for property investors. Property investors could be affected in the following ways:
- an increased tax bill on existing buy to let properties with a mortgage
- reduced ability to offset mortgage interest on mortgages taken out on existing properties for new investments
- greater liability where mortgages are secured on properties for new investments
Read more about tax changes in our blog 2020: New Tax Rules: New Opportunities
North & Midlands
The continued investment in the Northern Powerhouse and Midlands Engine meant that rental yields and investment opportunities were positive, and in fact, the North and Midlands were outperforming the South, London, and South West.
Early in 2020 reports of Coronavirus began to emerge in China, and for some time little was reported in Europe, the US, and South America.
And then in Europe the pandemic hit, and the UK was hit by a lockdown in March.
The Impact of Coronavirus
Back in March, we were still referring to the pandemic as Coronavirus. When the UK went into lockdown the housing market was impacted. Delays were caused by lenders moving their staff to home working. That meant delays in completions. For those people waiting for valuations and surveys, their purchases effectively stopped while virtual facilities were put in place, and lenders slowly began to accept desk-based valuations. New instructions fell, and in any event, the process was far slower.
Viewings were also stopped.
In July, the housing market re-opened, with an increase in house prices and lenders reporting increased demand.
For the buy to let landlord, furlough and job losses presented the challenge of otherwise good tenants struggling to meet their rents, and many reported freezing or reducing rents for their tenants. The Government banned evictions, which helped tenants, but for those landlords with problem tenants those issues are only now beginning to come to court for resolution so the financial burden on some landlords has been considerable.
Rightmove has produced a guide to help people understand what the rules are for the housing market now
Lockdown 2: English housing market is open
I live in England, can I move home? Yes, you can still move home. Housing Secretary Robert Jenrick has said that estate and letting agents, and removals firms, can continue to operate during lockdown….
While many people have fallen on difficult financial times and either been furloughed or lost their jobs, significant number of people move to working from home. As businesses have scrambled to make this happen it has become clear that not only does the technology exist to make this happen, but there has been a positive impact on productivity. Despite the Government drive to get businesses back, many have opted to remain on a work-from-home basis. This includes many public sector organisations too like some NHS trusts.
So what’s the opportunity here? As a result, rather than the rental market remaining static, there has been a measurable change in tenants now looking for larger properties. Could it be that tenants are looking for a property with office space indoors, or in a garden room. And is there a “baby bounce” thanks to the lockdown? Whatever the reason, many tenants are looking for larger properties, which is only good news for investors.
Stamp Duty Holiday
The stamp duty holiday was announced to stimulate the housing market, and in that regard, it appears to have been successful. It is scheduled to end at the end of March 2021, and at the time of writing, there are no plans to extend it.
Our sister company Liddle Perrett anticipates a rise in mortgage applications at the end of 2020 and an inevitable logjam as people try to complete before the deadline. Solicitors and conveyancers are likely to come under very significant pressure during this period too.
2021: Our Predictions
Our property investment review for 2020 has been challenging, and making predictions in a market that has undergone such significant shifts is difficult. In general terms, however, our forecast for 2020 has been accurate. You can read our August report here.
So what about 2021? There are reasons to be positive. Not least of which is the news that there are various vaccinations against Covid-19 nearing approval. And that clearly shows light at the end of a very long tunnel. Not only that, but despite the UK economy going into freefall early in 2020 (unsurprising since it was switched off), it has regained much of that ground. Which demonstrates resilience that has confounded many people. But there are other reasons
Reasons to be positive
In our recent blog #3 Good Reasons to be Optimistic for 2021, we look at three of those reasons. Already mentioned is the forthcoming vaccine, but the result of the US Presidential Election and recent announcement of the continuation of the furlough scheme until March provide stability and confidence.
There are opportunities for seasoned property investors, but for people who may be thinking of ways to protect their home, there are different opportunities. Taking a more innovative approach to finances is just one opportunity. Take a look at our blog where we look at a more innovative approach to personal finance and investment.
#1 Reason why property investment can help safeguard your home
In our latest blog we look at how property investment, let to buy and buy to live can help you if your household income is under threat. Let’s face it, this year isn’t going to go down in history as t…
So what other opportunities are there for the property investor in 2021? We’ve mentioned tenants looking for larger properties. With careful research the experienced property investor could identify areas where this could work for them.
Student accommodation is set to be an area set for expansion, and analysts have identified areas like Bristol, Edinburgh, and London as growth areas. And of course, the Northern university cities will fit this bill too.
The housing market is, without a doubt, experiencing a boom at the moment, and this is expected to continue until the end of March 2021 as people take advantage of the stamp duty holiday. Moving into the Spring and beyond, analysts anticipate that the housing boom will cool, and confidence fall somewhat. House prices may fall in the early months of 2021, but bounce back by the end of the year.
However, the rise in prices has not been uniform, with houses seeing the highest increases. Flats have not seen the same level of growth, so for the property investor, this is an area worthy of further study.
And of course, house price increases are not uniform across the UK.
Build to Rent vs Buy to Let
A new challenge that property investors will face is the rise of build to rent. Developers are building homes across the UK that they are then letting. And that means more competition in the marketplace. It’s a challenge to be mindful of, but with careful planning can be overcome. And there are developments across the UK underway or planned for property investors interested in new build properties to choose from.
The North & Midlands
Whilst house prices have increased at a faster rate in the North and Midlands than other areas, house prices remain lower. With the average price significantly lower than London and the South, we believe that the best investment opportunities will still be in the North.
And with investment in the Northern Powerhouse and Midlands Engine continuing, demand for high-quality rental properties will continue. Take a look at our blog Regeneration and business relocation: why the North and Midlands is the place to invest for recent statistics and our detailed analysis.
So what of Covid-19 in 2021? If the vaccines work and they are distributed efficiently it seems reasonable to expect some form of restrictions to remain in place until the end of March. It seems certain that the UK economy will go through significant challenges as businesses shore up their finances and begin to work towards growth again.
UK economy could return to pre-pandemic levels in 2021 after vaccine news | Daily Mail Online
Economists have raised hopes UK plc could return to pre-pandemic levels within six months after the bombshell news about a vaccine.A wave of optimism has been sweeping through scientists and ministers…
The Bank of England has forecast that the economy won’t return to pre-pandemic levels until well into 2022, but Douglas McWilliams, of the Centre for Economics and Business Research, said GDP could get back to 2019 levels by ‘as early as mid-2021’.
Property Investment Review 2020
For the property investor, there is much to be positive about in 2021. There will still be significant challenges to face, the indications of economic revival and opportunity are clear. There will be new opportunities and challenges, while old opportunities and foes will retunr.