Wealth manager and private bank, Coutts, suggests the UK’s prime property market is evolving, rather than suffering through these challenging times. Despite lockdowns and limits on viewings caused by social distancing, Coutts clients continued to buy property throughout 2020. In fact, the bank’s client-data demonstrated a rise in buying activity in main homes, second homes and investment properties when compared to previous years.
Outside of London, which remains the UK’s largest prime market, the south-east was the most popular area for new mortgages for main homes, particularly Kingston upon Thames, Guildford and Oxford (KT, GU and OX postcodes).
Coutts’ data also suggests an understandable renewed interest in the ‘staycation’ with and more people looking to secure a home-away-from-home to provide a change of scenery during lockdown. In fact, the biggest increase in purchases during 2020 was of holiday homes, which increased by 43% in 2020 compared with the year before. The most popular locations being the south-east and south-west of England, with Guildford and Tunbridge Wells proving popular in as well as West Cornwall and Gloucester.
Peter Flavel, Coutts Chief Executive, highlights how lifestyle changes drove many clients to reconsider their living arrangements.
He adds: “I know from my conversations with our clients over the last six to eight months that many are reassessing how they live and work. A lot of them are looking at their homes thinking about whether they match up to their lives today. Our clients have found that their homes have increasingly had to become school rooms, workplaces and social spaces. It’s not surprising that they’ve been looking for more space.”
“Schools will go back, and restaurants and pubs will re-open. But working from home could be here to stay, and the home cinema could be about to take the place of the multi-plex in many people’s lives. This could make smaller properties less attractive.”
When looking at prime property as an investment opportunity, Coutts believes that government policy will have a significant impact. The government plans to introduce a 2% Stamp Duty surcharge for foreign buyers of UK residential property from 1 April. This will provide added impetus for overseas investors to transact in Q1, Coutts believes. The Stamp Duty holiday on properties below £500,000 is also due to end 31 March 2021 and as such, Coutts expects strong demand in Q1 as investors rush to beat the deadline. Across prime London for instance, there are 16.2% more properties under offer now compared to a year ago, and Coutts believes a lot of this demand is being driven by buyers looking to transact before the Stamp Duty holiday ends.
Alan Higgins, Coutts’ Chief Investment Officer, says: “The market will need time to adjust to these changes and we could see a softening in demand in the second quarter as a result.”
But long-term, the bank believes the momentum seen towards the end of 2020 continue throughout the year ahead, largely down to social changes and a favourable macroeconomic environment.
Higgins points to three factors: “Firstly, the uncertainty with respect to Brexit is largely in the past. Secondly, we expect a V-shaped economic recovery as the vaccine distribution progresses. And thirdly, we should the release of pent-up demand from buyers and sellers who put plans aside during lockdown.”
“In the meantime, low-interest rates make financing cheap, and returns attractive compared to other assets for investors,”
Higgins concludes: “We expect close to zero rates in the UK for the next few years at least. The Bank of England’s Monetary Policy Committee is likely to ignore any rise in inflation and focus on reflation, and this is the main positive factor for residential property.”
