The coronavirus pandemic has had a huge impact on many things, including lifestyles, businesses, hygiene practices, but one of the biggest to follow is the effect on the property and UK housing market.
The Nationwide house price index for May showed that house prices fell 1.7% from the previous month, which is the largest decline for 11 years.
However, as lockdown restrictions begin to ease and most businesses restart this month, Rightmove has seen an increase in traffic to its website. The UK property portal reported a significant rise in the number of people searching for homes in quieter, more suburban areas, moving away from towns and city centres.
This possibly reflects the changing demand for households looking for more garden space and room for a home office, potentially because they are thinking of ditching the commute into town and working more from home. Once accustomed to a lifestyle of working remotely, many are looking at this as a long term lifestyle choice.
High streets have been hit twice as hard
For the commercial property sector and specifically retailers on the high street, the changes are far more dramatic.
“Retail [in the UK] has had problems for ages,” says Prof Michael White, an expert in real estate economics, at Nottingham Trent University. “And at the moment incomes are obviously being hit by furloughs, and then there will be a squeeze on spending in a recession.”
He continues: “Many High Streets have been decaying for years. And now that many more of us have discovered how much we can buy online, that is only going to increase in speed.”
“Coronavirus is accelerating the trend towards fewer shops on the High Street, and more services – such as cafes, hairdressers and beauticians – essentially, the things that you cannot get online.”
“The twist is that these services have been hit, so we have seen a slowing down of a growing trend,” says Prof Andrew Baum, who leads the Future of Real Estate Initiative at Oxford University’s Said Business School.
This means that High Streets have been hit twice as hard – many stores are shut and face-to-face service suppliers have almost totally closed.
Now more high street retailers are experiencing are going into rent arrears – if it is only a few months, it is not a problem and many will survive.
But if this is the start of a long-term trend, then that will cause problems, and possibly a knock-on fall in the capital value of many retail properties, possibly by 20%-30% believes Prof Baum.
New opportunities will emerge
“In times of crisis, new opportunities will always emerge,” explains Dan Kettle, of specialist finance company Octagon Capital.
“We may find a flurry of new properties coming available on the market, both residential and commercial.”
“Some entrepreneurs and homeowners will see an opportunity to purchase a property at a lower price, maybe for buy-to-let, or rent a location on the high street at much better rates than previously offered.”
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“If there is an over-supply of office space and high street stores, there is a deal to be had.”