4 ways the coronavirus will affect property investments
Updated: Dec 6, 2020
With the world on lock-down, here's how we see the UK property market reacting to the pandemic and what we plan to do about it
2020 so far has been a year of unpredictable developments, and uncertainty around the virus pandemic, which has affected every single aspect of our professional, social and personal lives. With governments, businesses and people around the world trying to prepare and find solutions to ease challenges ahead, we wanted to look at our sector, the effect the current situation is having on it, and what we are doing to ensure growth and positive outcomes.
Problem 1: Uncertainty over house price stability
One of the hottest topics in our industry - housing prices - their movement and trends, is being discussed at the moment with reinvigorated passion. There are a number of predictions that prices will fall, leaving many homeowners with a heavy burden of negative equity. Some market experts like Savills, whose stock movement we are closely following, are stating that the dip in the prices will not be lengthy one and are envisioning steady supply and demand. The short answer is - there will be an impact, but no-one at this point can be certain of its real consequences.
As our business model is built on buying, creating and holding income generating assets, the effect of the downward movement in housing prices on betterplace should be minimal. If the market does experience the run to the worst, we will be looking to offer creative win-win solutions and support to homeowners in need.
Problem 2: Negative effects of the virus on employment and the rental market’s stability
There is no question that Covid-19 will change many things drastically. One of the changes we are already seeing is the temporary shut-down of the hospitality, retail and non-vital business sectors. The reality is - jobs and business are already being lost and there is more to follow. The proactive response of the British government and their promise to pay up to 80% of the wages lost during the pandemic, as well as urging the banks to offer mortgage holidays, is a positive development we are happy to see. Unfortunately current measures do not cover people in self-employment, but we hope there is more to come.
As landlords we have responsibility to our tenants to ensure they have a good and stable place to call home and we are putting proactive measures in place to support them and ourselves in these uncertain times. Our lettings agents are keeping in regular contact with our tenants to ensure they let us know of any changes in circumstances and have already carried out a job loss risk assessments of our tenants. The majority of our tenants (80%) are working as essential service providers and their skills and expertise is in extremely high demand. We are proud to have them as our customers.
Problem 3: Increase in pressure on social housing
Following on from the previous point, with an increased risk of sharp rise of unemployment due to the pandemic, social housing availability will be of even greater importance. Existing shortfall of housing overall has been estimated by Heriot-Watt University to be 3.9 million homes in England alone. Increasing need for social housing has not been met before the virus and is sure to increase greatly due to it.
At betterplace we are working closely with local councils to help support communities and offer homes to everyone who needs them: professionals, families and social housing tenants. We believe it to be a win-win approach: we help tenants to find a good quality house to call a home and secure our business by diversifying our offer.
Problem 4: Reduced interest rates and the stock market rollercoaster
We have already discussed uncertainty around housing market prices, the stock market has been having a turbulent few weeks and are even harder to predict in the long run. Frankly, it has been a bit of a rollercoaster, with global news sending curves up and down like a cart on a fairground ride. Economists have been warning of another recession since 2018 and the prediction is getting more and more realistic since the pandemic has hit.
With the looming recession and market volatility good stocks and shares investment opportunities are becoming very difficult to forecast and manage. As investors ourselves we have made a choice to invest into property as a more stable, physical asset backed investment option. And, yes, there is also an element of unpredictability to mitigate and preempt which we have been building an expertise of the wider market and the market in our chosen investment areas over the past two years. We believe we don’t just assess the market and its movement, we spot opportunities where others don’t. If you are looking to invest into property yourself, be it a hands-free or a more involved investment, we would be happy to share our knowledge and expertise.
While no-one can currently predict exact changes that will happen not only in the housing market, but the economy as a whole and the world around us, we would like to think that proactive, positive and creative approach will help people and businesses to learn, adapt and focus their efforts on what matters the most.