The Covid-19 pandemic made the world come to a standstill. Every industry and every sector was affected due to this. Businesses like the real estate sector and aviation industry suffered a major setback. Companies incurred losses, businesses were forced to shut down, and the unemployment rate rose tremendously. In the UK, the three lockdowns had a severe impact on the economy. The real estate sector was deeply impacted, as the government did not allow any real estate activity during the first lockdown. Due to this, the real estate market in the UK took a nosedive.
After the first lockdown, the government allowed real estate transactions in the second and third lockdown in order to revive the real estate market. During this time, the UK real estate market attempted to recover, but it was nowhere close to the pre-Covid market. Buyers and sellers were on the rise, estate agents in Manchester were back to selling houses, inspectors and evaluators were on the job, but the real estate market was still in turmoil. In the UK, the real estate market of London was most impacted.
The decline in London’s population
As more and more people started working from home, there was a noticeable increase in the demand for bigger and better housing. Homeowners wished to improve their standard of living. They started looking for bigger homes, properties with outdoor spaces and open terraces, as well as places with home offices. Due to this significant demand, homeowners from central London decided to move to the boroughs and suburbs of London to buy bigger houses that were relatively more affordable.
As more and more people shifted out of London, the prices of real estate in London started diminishing drastically. Also, let’s not forget about the low numbers of international people in London. Due to the pandemic, very few students are coming to London to study, and even fewer people are shifting to London in search of employment, which again adds to the decline in population.
Fall in rental prices in London
Again, as more people started working from home, the demand for owning homes or renting homes in London started to decline. Now, people no longer needed to live close to their place of work. Instead, they started moving into spacious homes with gardens and open spaces to cope with the multiple lockdowns. Due to this change in dynamic, the demand for real estate in London dropped. Even international renters and overseas buyers no longer showed interest. The average rental price in prime locations in central London took a big hit. According to Zoopla, the average rentals in London fell by 6.9 per cent in 2020. In areas like Kensington & Chelsea, the average rental price dropped by 10.2 per cent while in central London itself, the average rental price fell by a whopping 15 per cent. However, it is expected that the vaccine rollout coupled with the increase in foreign renters will eventually help stabilise rental prices.
Impact on stamp duty holiday on prime properties in London
The UK government announced the stamp duty holiday, a temporary suspension of the stamp duty tax levied on property purchases. This scheme was announced as an attempt to boost the real estate market in the UK. While the stamp duty holiday certainly helped revive the real estate market on average, it did not have such a major impact on high-end properties in prime locations in London. This could be for two reasons, the lack of demand for high-end properties in central London or the high prices of real estate in the area.
While no one can predict with any amount of certainty when the real estate market in London will return back to normal, one can only hope that the introduction of the vaccine will help stabilize real estate prices in the near future. The fall in average prices has also made London an attractive investment for overseas buyers, which should help the London property market get back to normal.