The coronavirus vaccine roll-out is going far better than any of us could ever have imagined, with more than a third of adults having already received their first dose, allowing us all a glimmer of hope of a return to normal life.
We still have a long way to go but in the short term, the vaccination programme is injecting much more than the power to create antibodies into our systems; it’s giving us confidence – and we all know that consumer confidence is intrinsically linked to the success of the property market.
Despite the economic uncertainty of 2020, the property market rode the storm remarkably well, with house prices stimulated by the stamp duty holiday as well as a general desire for more space at home and easier access to green spaces outdoors.
In 2021, the success of the vaccine roll-out is already having a positive impact on the economy, with the Office for Budget Responsibility predicting GDP will grow by 4% this year and regain its pre-pandemic level in the second quarter of 2022, six months earlier than it forecast last November, just before the vaccination programme began.
But there are still many hurdles to overcome and the economic picture could look very different once the government’s life support system of grants and reliefs is finally switched off.
For example, the business rates holiday has been extended to the end of June but after that commercial tenants – or, in the case of vacant properties, their owners – will once again have to foot the bill once any subsequent empty property relief comes to an end. And for those who own multiple commercial premises which cannot be let due to lack of demand, that bill could be a huge one.
We have already seen an increase in commercial properties being offered for sale by auction. Many of these are tenanted but their owners are astute enough to future-proof their portfolios rather than waiting to see if their tenants’ businesses can survive without government support.
These landlords are already anticipating that there won’t be enough tenants to go round, increasing the cost of ownership and potentially having a negative impact on values, making them reconsider if their commercial properties are assets worth hanging on to.
In the residential property market, the stamp duty holiday has boosted both demand and prices and its extension will have been welcomed by many. But unpredictable sale-to-completion times means even the new deadlines carry an element of risk and this unpredictability has already driven many private sellers and estate agents to take advantage of the speed and certainty of auction, many for the first time, to ensure completion takes place before the deadline.
Not all extensions have been welcomed so warmly within the property industry, namely the ban on bailiff-enforced evictions in England now runs until the end of May. When this is lifted, there could be a huge backlog of cases to work through, meaning landlords are unable to take possession of their properties as quickly as they’d hoped and still have their own overheads to cover. Many landlords will choose to cut their losses instead, selling their property with a tenant in situ to free up capital to reinvest later.
We can expect more movement in the whole of the property market this year, as by summer, most of us should have been vaccinated and feeling more comfortable about heading back out into the world.
Feeling fortified by the protection bestowed by the vaccine, not only will people be keen to socialise, eat out and go on holiday – all of which we hope they will approach sensibly – they should also feel more confident about considering the next stage of their lives.
After a year of living in limbo – whether furloughed or swamped by work – many people will be ready for change, perhaps a new home or a new job. Couples may be ready to move to a bigger property to provide space for a home office or to accommodate a growing family. Alternatively, months of close-quarter living may have put undue strain on the relationship and they may be looking to move into two smaller properties following a split.
Arla Propertymark’s Private Rented Sector Report showed a surge in demand for rental property in January, rising to 81 registered prospective tenants per branch from 64 in December, and I expect demand to remain high throughout the year.
Shrewd investors will anticipate this increased demand and buy now so they have rental ready homes to let when they are needed. This will also enable them to take advantage of the extended stamp duty holidays, potentially saving thousands even when the 3% second homes surcharge (4% in Wales) is taken into consideration.
Preparing a home to let creates work for tradespeople, while tenants and buyers alike will be eager to put their own stamp on their new homes with furniture and décor items, again illustrating the important links between the property market and the wider economy.
As the economy begins to recover, job opportunities may open up to graduates, who may need to relocate, while other young adults who have been living with parents will be more than ready to spread their wings. For this age group house shares and HMOs, particularly those with big communal spaces, will remain a popular choice as a reaction to the loneliness and isolation that many single people felt during lockdown.
We all know that consumer confidence – or lack of it – is a critical component in the property market, with the ability to drive prices up or down. Similarly, rental increases are ultimately driven by tenants’ ability to pay, which is naturally linked to the state of the economy. So if the successful vaccine roll-out can boost the economy as well as allow us to hug our families and meet our mates at the pub, then we should all feel able to look forward to much brighter days ahead.
*Andrew Parker is the managing director and auctioneer at SDL Property Auctions.