In trying to anticipate what a post Covid-19 property market will look like, we need to consider a few key factors namely, pent-up demand, historical price trends and behavioural changes.
If we had to refer back to the 2007 financial crises, property prices in central London fell by 26% within a few months from the beginning of the crises. Then as the world started to sense signs of a recovery, investors acted fast and by January 2010 central London prices were back to their pre-2007 levels.
Similarly (but nowhere as severe), when the pandemic struck in March 2020 the market froze very quickly, but once restrictions were lifted on May 13, things started to pick up pace faster than expected. At the time leading estate agents reported a significant bounce in online property activity. Property portal Rightmove had reported that visits to its website returned to pre-lockdown levels on the day the market reopened with 5.2 million visitors. The introduction of a stamp duty holiday also exacerbated this further.
Working from home and the general appreciation of the positive environmental impact of healthier air and cleaner skies has led to faster adoption of technologies that were previously feasible but not widely adopted. These behavioural changes will also have a significant impact in shaping a post-pandemic market.
To complete the picture we also need to consider the another major issue - Brexit. This time round though we believe that despite some uncertainty, the impact on property prices will be far less severe because the 'Brexit factor' is already largely priced-in.
Turning to forecasts, Savills is expecting that on average, property prices across London will increase by 3.4% in 2020, then flatten in 2021 and thereafter increase by 4%, 6.5% and 4.5% in 2022/23/24 respectively. Although these number are encouraging, in times like these it is all the more important to take a long-term view of the market and position oneself accordingly.
In the midst of any crisis, it is very difficult to predict which changes will become permanent and which will quickly be forgotten. The factors we discussed above coupled with some long awaited good news should however help investors formulate a robust property strategy as we head into 2021.
