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How Will COVID19 and Brexit Impact Property Investment?

Economic challenges, such as Brexit and COVID-19, have created much doubt surrounding whether 2021 is the ‘right time’ to build upon an investment portfolio. Although as it stands, this year might just be the opportune time to invest in the UK property market. 

The impacts of Brexit have caused a major turbulence for many sectors, especially the manufacturing and aviation industries. However, with low interest rates and more affordable mortgages, there is a degree of optimism for the property market, offering investors a unique investment opportunity.

There are many reasons why people should start investing in property as soon as possible, even if you are a first-time buyer or a current investor in the market. Over the years, the property market has sustained many turbulent times, from recessions to political uncertainty, and with the unprecedented growth throughout 2020, it has continued to demonstrate its resilience. With this in mind, many believe that 2021 is an opportune time to invest, because post-pandemic, the property market is expected to stabilise to an above market average. 

While property remains a desirable asset, we expect investment habits to change in accordance to evolving tenant demands. As regional cores continue to surge ahead of traditionally popular markets, the following UK hotspots (shown in figure 1) are now vying for the spotlight. The table shows Manchester and Edinburgh are leading the way for future growth; however, they are also the two most expensive markets. Birmingham is shown to be the most affordable UK city, with only 0.6% less growth over the next 5 years. This highlights the importance of the second city’s core strengths in the property market.

Best Areas in the UK for Property Capital Gains
Source: Zoopla & JLL

One great way to invest in real estate is through student accommodation. Becoming a landlord and advertising to students in city centres is great to start earning recurring income per annum, or even each month. Popular cities as mentioned above; Birmingham, Manchester, and Nottingham rely heavily on a student demographic to propel property investments. This reliable tenant demand offers the opportunity for prospective investors to begin building their property portfolios. This is aimed directly at students, as the accommodation often offers flexible contracts, affordability, plug and play living, community engagement and provides a hassle-free living experience. On the downside, accommodating students often circulates with many parties, and complaints so just bear this in mind.

The pandemic has affected students because many are still paying for student accommodation, even when they physically cannot travel there, with many travel restrictions and issues with support bubbles. After Boris Johnson’s roadmap out of lockdown, we may see students returning to University halls. This will also benefit landlord’s later in the year, as more students will hopefully apply to Universities when they know lockdown is completely over. Therefore, there will be a higher demand for housing in these city centres.

On average, the less experienced in the real estate sector continue to drop out of the market due to worry of losing property income. With low rates and currency benefits, this has allowed investors to take advantage of one of the most stable assets in a robust market that has continually proven to deliver returns over the long-term. The temporary Stamp Duty holiday that was introduced in July 2020 aimed to stimulate a recovery from the initial market freeze, but went on to catalyse a post-lockdown boom.

This relief will now be available on properties in England until the end of June 2021 following the extension. Buy-to-Let investors will continue to only pay 3% SDLT on purchases up to £500,000 – due to the additional property rates still in place – which could mean savings of up to £15,000 when buying during this period. 

Another impact of COVID-19, has caused many to move from city centres and move to rural destinations in the UK, including Cornwall and Devon for a better life. Difficulties of city centre accommodation for many have been a struggle this year, with many being trapped in properties that are usually smaller than elsewhere and having less access to a garden (21% of Londoners have no garden). The rising rental prices in the capital has only propelled this trend, and it is no surprise that many wealthy couples and families are moving away from London to more affordable, rural locations. After lockdown, we may even see many Brits search for better lives overseas. 

The past year has definitely been a journey for the property market, nonetheless low interest rates and government measures have helped to recover the industry. It is extremely hard to predict how the UK economy will respond, however, now is a good time to invest in UK property if you are looking for a stable and long-term profit. 

The real estate market is an attractive investment in the long-term for potential consumers. Long-term investment is a strong and firm decision if you are willing to invest, rather than short term proposals. There is still a doubt what the future holds for the property sector, but for now, it’s the best time to invest.

This guest post was provided by Poppy Surplice from The Centre of Brexit Studies. The opinions expressed by the guest writer above and those providing comments are theirs alone, and do not necessarily reflect the opinions of SevenCapital or any employee thereof. SevenCapital is not responsible for the accuracy of any of the information supplied by the guest writer.

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