2020 – A difficult but successful year with some buoyant outcomes for property investors
Welcome to our review and a look ahead, to 2021. Last year was a year that challenged us all to live and work in new ways – we adapted quickly, and we now have three vaccines and a Brexit deal – here is a review of some of the highlights for property investment and some thoughts on the shape of things to come.
The Brexit deal is done! This combined with the Covid 19 Vaccine is predicted to lift the UK economy by 5.5% GDP in 2021 .
The eagerly awaited Brexit deal is done and the UK has enough Covid 19 Vaccines to roll out for the entire UK population by spring 2021. This hugely positive news is predicted to boost consumer confidence, with economists at the EY Item Club suggesting it could be enough to grow the UK GDP by 5.5%.
Source: The Telegraph
House prices have had their biggest rate of growth in 6 years
2020 was an unpredictable year – but one of the biggest things we couldn’t have predicted was that Covid 19 would cause a surge in property prices – Nationwide have reported that UK house prices have climbed 7.3% in 2020, the sharpest rise for six years!
Figures from the bank of England also show that mortgage approvals hit the highest level in 13 years in November. This is thought to be largely down to the Stamp Duty holiday potentially bringing forward some demand from 2021, as well as some pent–up demand from the stricter lockdown restrictions earlier in 2020. Some reports suggest this may drop back in 2021, with Halifax predicting a drop of anywhere between 2 and 5%, however we have seen a lot of our demand driven by the re-evaluation of lifestyles, changes in work-life balance leading to a huge rise in demand in new homes, especially those in rural and coastal locations.
Paresh Raja, CEO of Market Financial Solutions, has also predicted that “demand will remain strong” in 2021, even if the pound weakens after Brexit. “In times of volatility and uncertainty, people tend to gravitate towards assets that are not only positioned to deliver returns, but can also provide some kind of security”.
A record surge in new home searches over the Christmas period
Property websites saw a huge surge of visitors over the Christmas period, with online searches on Boxing Day doubling vs 2019. At Acorn we reported a fantastic increase in web traffic of 111.4% YOY, whilst Estate agent, Savills, reported highs of 130% compared to last year and Rightmove had its biggest ever Boxing Day for visits at +54% YOY. It is thought that the increase in demand is based on consumers being buoyed by a positive Brexit deal, the impending end to the Stamp Duty holiday on 31st March, the lockdown meaning people are spending more and more time indoors – getting tired of the same four walls and those in search of a lifestyle change with open green spaces.
Source: This is Money
Interest rates predicted to stay low and may go lower
The Bank of England is predicted to keep interest rates low through 2021. Bloomberg reports that continued uncertainty over the path of the virus along with elevated unemployment and weak inflation are the main reasons for waiting.
Laith Khalaf, a financial analyst at AJ Bell, said expectations of another year of ultra-low rates are “baked in” despite the roll out of coronavirus vaccines, and the emergence of a Brexit deal. Mr Khalaf said that more than a decade after the Bank cut rates to an “emergency” 0.5%, few would have expected them to be even lower and that there was still scope for a further fall. “With such a fragile economic situation, the Bank won’t want to rock the boat by hauling in its vast monetary stimulus programme any time soon. Whether the MPC takes the plunge with negative rates really depends on the course of the pandemic, and the progress of the economy, in the coming months. A Brexit deal has at least averted a further economic shock which might have tipped the Bank of England towards a rate cut.”
Where to invest now?
The question on most people’s minds will be where to invest their money if interest rates remain so low – stocks and bonds are considered the only long–term wealth building option for most. By investing in property without the outlay of costs, or the hassle of being a landlord – Investment Bonds or Growth Preference Shares could be the easiest way to invest in an asset in times of uncertainty and get a healthy rate of return.
The year ahead
2021 is set to be another exciting and busy year for Acorn with construction set to start on a number of brand-new sites in areas of high demand and sales teams dealing with the increase in demand on our current sites. We are continuing to strengthen our presence across the South West, starting the year with several new acquisitions in Devon and Cornwall. We’d love for you to be part of our exciting journey of growth – speak to our Investor Services team to see how you can be involved.