For decades property has been the preferred safe investment for many. People have lived by the mantra “with bricks and mortar you can’t go wrong”, but, is this still the case? Jamie Johnson, CEO of FJP Investment, gives us his views on whether this is still the case.
At the beginning of 2020, before the coronavirus pandemic struck, the UK property market had been steadily gathering strong momentum. However, when the nationally imposed lockdown came into force at the end of March, estate agents were forced to close their doors and social-distancing measures made physical viewings impossible. The property market had effectively come to a standstill.
Reports from Estate agent Foxtons showed their revenues dropping 22% as the nation was in the throes of crisis. Inevitably, the current climate has led many investors to reconsider their financial strategies. However, while the future is unknown, there is good cause for optimism.
With the UK slowly easing out of lockdown, the market is now showing signs of recovery.
With the infection rate of coronavirus now on the decline, the Government has ramped up its efforts to revitalise interest in the property market. According to Foxtons, the market seems to have already bounced back, with sales up on April and May and lettings now almost at pre-crisis levels.
Yet, given the broader economic concerns and with fears of a second COVID-19 wave mounting, the question still stands for investors: can this period of recovery be sustained, or can we expect a second decline in activity as the economic impact of the virus filters through the market during the second half of 2020?
Such questions are of vital importance where the long-term capital growth of UK property is concerned, as buyers will only be willing to invest safely in the knowledge that sudden market fluctuations won’t affect their portfolio going forward.
Looking to the past for answers
With the future of the virus still uncertain, it’s worth looking to other market trends that have affected the housing sector in the past to ascertain how quickly buyer demand will return to the market.
The property sector dislikes uncertainty, and the lack of clarity regarding Brexit in recent years led to a subdued market. The uncertain political landscape following the EU referendum prompted the market to slow down, causing international and domestic buyers alike to waver over making any decisions about their portfolios or pursuing any large investments in property.
However, following the election of Prime Minister Boris Johnson in December 2019, the market enjoyed a post-election bounce, with the number of sales agreed in London up 19 per cent compared to the year prior. In January 2020, the UK property market saw the highest rate of house price growth since 2017, quashing all concerns that the decision to leave the European Union would cause irreparable damage to the market.
As coronavirus jitters begin to fade and life as normal slowly returns, the question now is whether investors can expect to see a similar sort of recovery.
Cautious optimism
Although the market’s recovery from the pandemic might not be quite as sudden, the UK’s history of rapid recovery in the property market sector in the recent past should be a cause for optimism. With low-interest rates and the stamp duty holiday helping to sustain buyer demand, the Government is doing all it can to ensure that the housing sector is able to weather the storm as quickly as possible.
Indeed, now that the UK has flattened the COVID-19 curve, there is still a great appetite in the property market as social distancing measures relax. A recent study by FJP investment has revealed that a third believe financial markets will recover quickly once COVID-19 is brought under control, and almost half believe that property is still a safe and secure asset, even in the midst of the current crisis.
With record-low interest rates spurring investors into action once again, it is clear that UK investors still feel a high degree of trust in the long-term capital growth delivered by bricks and mortar, even in such uncertain times.
Although it remains a possibility that this early recovery could potentially be derailed by a second spike of the virus; as the UK navigates its way out of the lockdown and into calmer waters, I have a positive outlook for the post-pandemic market recovery. The performance of the property market over several decades should instil investors with the confidence that property remains a safe and secure long-term investment.
This guest article was written by Jamie Johnson, CEO of FJP Investment.
Jamie Johnson is the CEO of FJP Investment, an introducer of UK and overseas property-based investments to a global audience of high net-worth and sophisticated investors, institutions as well as family offices. Founded in 2013, the business also partners with developers in order to provide them with a readily accessible source of funding for their development projects.
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