Using recent data, Jamie Johnson examines the current mood of investors and what incentives and financial tools are needed to maintain and increase the positive momentum currently seen in the property market.
Any recovery from COVID-19 will be long and arduous. Entire sectors of the economy are still reeling from when lockdown restrictions were at their harshest, while simultaneously seeking new stimulus to help fuel a post-pandemic economic recovery.
Ensuring investors have the right incentives and tools, then, to help facilitate this recovery is of tantamount importance. The government has realised this, implementing a variety of schemes all designed to coax domestic and international investors back to the UK. The most notable of these has been the stamp duty land tax (SDLT) holiday.
This bid to attract buyers back to the real estate market has, so far, been a measured success. Property listing site Rightmove recorded an immediate 75% increase in buyer enquiries during the month following the holiday’s implementation; and the latest Halifax house price index (HPI) for August revealed that average house prices have risen year-on-year by 5.2%.
These initial signs indicate that demand for real estate didn’t simply vanish during the peak of lockdown. In my opinion it accrued, with prospective buyers waiting until there was a greater degree of certainty about the impact of the pandemic on the property market. The SDLT holiday, it seems, has once again sparked interest and compelled domestic and international buyers to take advantage of lucrative real estate opportunities currently on offer.
What worries the government, however, is whether this momentum can be sustained. Investors will only act if they feel confident in the government’s financial and epidemiological competence regarding COVID-19. Otherwise, they will simply hold off until the virus has been contained globally. In turn, this will ultimately delay any post-pandemic economic recovery for the UK.
With this in mind, FJP Investment recently commissioned a survey of over 900 UK-based investors with portfolios larger than £10,000, excluding workplace pensions and residential property, to measure their confidence towards the government’s handling of the pandemic.
Our research shows that, although the stamp duty holiday has been positively welcomed, there is still far more than can be done to incentivise investment into UK property once again. Below, I have covered our key findings.
Among the investors surveyed, just under a quarter (24%) stated that they were planning on buying one or more properties to take advantage of the SDLT holiday, a percentage that rises to 43% among those aged between 18 and 34.
Those who have been contemplating making their first step onto the property ladder are understandably attracted to the comparative discounts the holiday provides, which can potentially add up to £15,000 depending on the value of the property in question. With the holiday currently due to end on 31st March 2021, prospective buyers will be keen on closing on transactions before this date.
Nonetheless, 43% of investors feel that more incentives should be offered by the government to encourage further property investment. Over half (54%) believe that the mortgage payment holiday relief scheme should be extended beyond October 31st 2020, and 57% are in favour of more financial relief for business that have experienced disruption due to COVID-19.
Preparing for a post-pandemic recovery
A more pressing concern for the government is the perceived failure of its public health strategy as of late. Of the investors surveyed, 54% admitted that they had lost confidence in Boris Johnson’s government due to its handling of the COVID-19 pandemic thus far. Unfavourable international comparisons and successive policy U-turns risk domestic and international investors being too fearful of a second lockdown to invest in UK property.
Regaining a reputation for competence and good governance should be at the forefront of Boris Johnson’s mind, therefore. Ensuring that property investors and prospective buyers have the financial tools needed to close on transactions, and feel confident doing so, is absolutely necessary to sustain the current boom in UK property. Positively, there is clear investor appetite for bricks and mortar, and this boils down to its advantages as an asset class.
I’m optimistic that the right calls will be made, and that buyers will continue to be properly incentivised back to the market. I believe the state will right the proverbial ship regarding COVID-19 containment, and that investors at home and abroad will become more aware of the fantastic investment opportunities to be found in the UK real estate market.
This guest article was written by Jamie Johnson, CEO of FJP Investment.
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