COVID-19 has had a profound impact on the UK property market, not only through shifting economic tides, but by changing the way people think about where and how they live, work and shop. Whether you’re a residential or commercial property owner, this overview of the post-coronavirus property landscape could help you navigate the coming months.
Residential Property
The UK’s Nationwide house price index for May 2020 showed the most significant annual fall in over a decade, with prices falling 1.7% from the April average. The economic factors contributing to the recent drop in house prices make the situation seem pretty grim: widespread wage reductions and lay-offs coupled with closing businesses and job scarcity mean people aren’t rushing out in their droves to put down deposits and tie themselves to 25-year mortgages.
That said, there does seem to be light at the end of the tunnel, according to some commentators. For example, economist Robert Gardner believes the house market will stabilise in time because this is no ordinary economic slowdown, but a result of a temporary measure put in place by the government. Others suggest that the government’s furlough scheme and business support during lockdown will help the housing market bounce back once restrictions have been fully lifted.
But economic factors are just one part of the picture. According to data from Rightmove, the UK’s biggest property website, lockdown may have changed the way people think about their homes—where they want to live, the type of lifestyle they want to lead, and desired proximity to urban centres. Since lockdown started, there has been a significant increase in searches for houses located in out-lying areas with more outdoor space and an extra bedroom for use as a home office. This suggests that people are looking at properties with a view to maintaining the ‘lockdown’ lifestyle we’ve all grown accustomed to—who doesn’t like spending more time at home and less time in traffic? (Interesting to note that much of this data relates to the UK population’s wishful thinking, since these figures emerged during lockdown, when renting and buying property was not even an option!)
Commercial Property
The commercial sector has been hit hard by the coronavirus, and unlike the residential sector, seems unlikely to recover anytime soon. Property experts speculate that the magnified effect of the economic slowdown on commercial real estate is due to the fact that the lockdown came after an extended period of slow decline. The UK high street has been on the ropes for years, with many household names closing their doors long before the word ‘coronavirus’ hit the news.
Another factor working strongly against the recovery of the commercial property sector is the changing behaviours of consumers. Recent years have seen a shift from in-person shopping to buying online. This posed a challenge to high street retail that may already have been insurmountable before the lockdown accelerated UK buyers’ migration to online. Initially of necessity but increasingly by preference, consumers sought out home-deliveries of items they would usually go to the shop for.
And what looked like a positive recent trend on the country’s high streets—services like barbers and salons replacing high street retail outlets—may have withered on the vine, with lockdown closures forcing many small businesses to close for good. The commercial sector is also set to suffer the biggest loss in the current economic slowdown as people tighten their belts for a period of job uncertainty.
This combination of factors means that many retailers, and the small businesses that initially replaced them, will not reopen in the foreseeable future, meaning a backlog of rent-arrears for commercial landlords. While individual property owners will suffer a loss of income directly, this burden is shared by the industry as a whole. Experts predict that if this trend persists long term, commercial property prices could fall by 20-30%.
Commercial office space seems to be faring slightly better than retail for the moment because many companies have continued to work from home, allowing the continuation of rent payments. That said, whether companies will renew their leases on work space remains to be seen. With cost-cutting a top priority, more and more businesses look set to continue working from home in the future, something that may have seemed impossible a few months ago but—after a crash-course in managing remote teams!—has become the new normal.
Adaptability will be key if commercial landlords are to thrive in this changing market. A positive solution could be the conversion of industrial space to living space, to take advantage of the comparatively greater resilience of the residential property market. If this sounds strange to you, consider how trendy ‘warehouse’ or ‘loft’ apartments have become in recent years!
Property Security in the Interim
Whether you own residential or commercial property in the UK, the coronavirus has not done you any favours, and it may not be business as usual for a while. Good tenants will be harder than ever to come by, and selling at this time may not be wise or even possible. If your property is residential, you may opt to sit tight for a while and wait for a recovery before selling. Similarly, commercial landlords might need time to consider next steps, whether that means converting, renting or selling.
With a newly vacant property on your hands, security will be a top priority—as will saving money. We secure empty commercial and residential buildings at no cost to landlords. Our responsible property guardians provide live-in security in exchange for low-cost temporary accommodation, a classic win-win, especially in these challenging economic times. Not only is our service free, saving clients thousands of pounds per year on traditional security expenses, but you can also save on other costs like vacant property insurance and Empty Rates. If this sounds like something we can help with, please get in touch!