By Alicia Buller
UK real estate firms have witnessed a 'noticeable uptick' in buyer interest in June and July, buoyed by government stimulus
The UK property sector has witnessed a major bounce-back as pent up demand is released into the market, say experts.
According to Tom Bill, head of UK residential research at Knight Frank, the strength of both buyer and seller demand in recent weeks has ‘taken people by surprise’.
“At the moment, demand is very strong,” Bill said, attributing the surge to pent up demand from ‘the last five years’.
He said the national flurry of property activity had stemmed from the ending of the country’s lockdown but also from the resolution of years of political volatility.
“It’s a similar story across most UK markets… the starting gun on the British property market began in December 2019. With the return of the majority government we saw interest explode across all markets, London and beyond,” Bill said.
“That demand was put on hold in March this year because of the pandemic – everything went into deep freeze. Since mid-May, the market has picked up from where it left off and has continued on that strong trajectory,” he added.
However, the expert noted that uncertainty still looms over the country’s property market.
Bill said a ‘second wave’ of coronavirus and the effects of the UK government withdrawing its financial support measures were factors that could potentially derail the market surge. “There is still a question mark over it all,” he said.
In a boon for global buyers, the UK government has lifted the threshold at which people start paying stamp duty for residential property from £125,000 to £500,000.
The change, effective immediately, is a temporary measure designed to boost the housing market and the measure will remain in place until 31 March 2021 next year.
Properties over £500,000 will pay stamp duty, however the rising of the nil rate band means they will pay £15,000 less than before.
The UK Chancellor commented that the government pressed ahead with this decision in order to stimulate more deals in the market, encourage people to move home and support jobs, both nationally across the UK, but also from global real estate purchasers.
The number of offers accepted by sellers in the UK hit a record level in June said Knight Frank in its latest report. The figure was 46% higher than the second highest month on record, which was March this year. June was also the second highest month on record for new instructions to sell.
Gray Stern, co-founder and CEO of Dot Residential, a UK-based online platform that enables international investors to buy British property, said he has seen a “noticeable uptick” in buyer interest in June and July, buoyed by government stimulus.
“How long this surge will last for is unknown. We don’t know yet what the effect the government ending its furlough scheme will have on national unemployment and economic activity,” said Stern, noting that 20 percent of Dot Residential investors hail from the Gulf.
“We will see the true fallout of the lockdown around three to six months after furlough ends. However, our investors take a long term view, so we remain cautiously optimistic,” he said.
Bill said the current “weak” pound exchange is a boon for Arabs looking to invest in the UK property market.
“The UK property market could potentially see an uplift in interest from Arab buyers given the pound’s current value but it’s important to have one eye on Brexit as well,” Bill said.
“It looks like Brexit could come to some resolution by the end of year, so we could see Arabs take advantage of the currency play before then. If there is some sort of deal between the UK and the EU towards, the pound will get stronger.”
Bill also noted that the introduction of a two percent surcharge for overseas buyers coming in April 2021 could also prompt a rush of buyers to cash in before the new fees come into play.
“You could see a situation at the end of the year where Middle Eastern buyers step into the London market in greater numbers,” he said.
Amid the newly revived appetite for London properties, the developer behind the £9 billion (AED41.86 billion) Battersea Power Station regeneration complex said it has seen a return of Arab interest in residential property.
“The travel ban impacted demand from individual residential buyers but interest has already has picked up. We have started to see larger volumes than before lockdown,” said Andrew Jones, international sales director at Battersea Power Station (BPS), noting that around 25 percent of the development’s buyers hail from the Gulf region.
“The London property market has historically shown resilience and the ability to recover very quickly, whereas the regions can be slower to recover,” Jones said.
Set within 42 acres along the River Thames, the development is the largest regeneration project under way in Europe. The completed Battersea Power Station project will house 4,239 homes and three million square feet of commercial space.
According to Jones, BPS attracted interest during lockdown from GCC-based ‘professional buyers’ – investors who are looking to purchase multiple numbers of apartments on an off-plan basis.
“They were investors who have invested with in the past and are comfortable to buy off plan – the weakness of the pound plays into that,” he said.
Jones also noted that BPS could appeal to Arab and global buyers looking for a haven in pandemic times.
“We have nearly 20 acres and tonnes of green space while being in a self-contained community and environment. We have large-sized apartments and everything is within walking distance. These benefits all play into the needs of a post-pandemic world,” he said.