Covid-19 and the property market

Official figures show that the UK economy, and the property market specifically, have taken a nosedive. Prices fell by nearly 2% in May. This fall in price is the largest decline the property market has seen in more than a decade. However, according to Nationwide’s chief economist, we are now seeing signs of the market stabilising. Many economists have also been quick to point out that the current situation is different from other economic downturns that we have witnessed.

Rather than allowing the economy to crumble under Covid, the UK government did what most other governments did. They put the economy on hold and introduced financial protections for both individuals and businesses.

While the pandemic has placed a tremendous emotional and professional strain on many landlords, others have managed to use this time to their advantage. Lots of landlords have a never-ending to-do list of odd jobs and other minor fixes that their properties either need or would benefit from. With a temporary freeze in taking on new tenants and making sales, a lot of landlords finally had the time to tend to some of the tasks that they had previously been putting off.

COVID-19 And London Property Prices

According to the property website Which?, the UK’s property market has now reopened in earnest. We aren’t back to the pre-Covid market by any stretch. However, property trades are now beginning to move again. Both buyers and sellers are engaging with the market just as they used to. Still, it will take several months before property prices stabilise. Until that happens, no one can say for sure what impacts Covid-19 has had or will continue to have on the markets.

As an incentive to encourage buyers to purchase property during these uncertain times, the UK government instituted a temporary cut to stamp duty. Buyers who move into a new property before April 2021 could save themselves up to £15,000 on their tax bill. Provisional data released by HMRC suggests that this measure has been somewhat successful. Property sales are still down 27% when compared to last year. However, the cut did herald a 14.5% increase in month-on-month sales.

The long-term impact of Covid-19 on property prices remains to be seen. We won’t know with absolute certainty how Covid-19 has impacted the property market until it is more or less over with. Land Registry UK maintain the House Price Index for the country. Most property businesses regard this Index as the gold standard for measuring UK house prices. According to Land Registry UK, we should have a clearer picture of the long-term impacts of Covid on the property market by 21st October.

The damage inflicted by Covid 19 on global markets has been well documented by the financial press however the swift and decisive financial intervention by the government has unquestionably minimised the shock.

Our view

We have always been of the opinion that the real estate market in London is extremely resilient and that it recovers very quickly from market shocks; whether they be national or global. It is for this reason that London real estate is regarded as a safe haven and this time has been no different to past experiences. As lockdown has been gradually eased, we have seen a number of very positive signs of recovery in the market. Whilst transaction volumes are still low compared to historic levels,  there is no doubting that positive sentiment is returning. This applies not only to the investment market but also to the occupational market; life is returning to London’s shops, bars, and restaurants, and office workers are gradually returning to work.

 

Construction across London has continued almost uninterrupted throughout lockdown and in the last few weeks activity in the investment market has significantly picked up with a number of high-profile transactions going through. There is undoubtedly a widening gap between the best properties and secondary ones but the right property in the right location is still attracting a lot of interest and achieving a price at or above pre-Covid levels. Values have largely held firm and this is not only very encouraging but also underlines London’s resilience and confirms its status as one of the top global destinations for real estate investment.

 

As such we strongly believe that it is now appropriate to recommence our activities with a view to start investing in value-add opportunities by the end of the year.

What's next for Canary Wharf?

The continuing regeneration of Canary Wharf from derelict docklands to thriving financial hub is one of London's greatest success stories, and the story is far from over. In the 30 years since development began, this mixed-use estate spanning 97 acres in the Borough of Tower Hamlets has opened up new opportunities for investment in the UK capital – first for multinational businesses and now increasingly for young start-ups and overseas property buyers.

Since 1987, the mission of the Canary Wharf Group has been to create a new city district in East London that was both a great place to work and to live. With over 2,400 homes currently under construction around the district, 20 acres of public parks and squares and more than 300 shops, restaurants and other amenities serving the growing community, that mission is accomplished, but not over.

The opening of London's high-speed Crossrail Elizabeth Line in autumn 2019 (delayed from December 2018) will make Canary Wharf an even more attractive prospect for tenants and landlords. Property prices have already seen above-average growth since Crossrail was announced, and Jones Lang LaSalle (JLL) predicts double-digit price growth once the service is up and running.

With a further 10.5 million square feet of mixed-use development in the future pipeline, including 3,385 homes and more public spaces and amenities, Canary Wharf is on track to become one of the most sought-after addresses in London.

Mature business location

More than 150 major office tenants occupy over 16 million square feet of completed office space in Canary Wharf, among them the global headquarters of HSBC at 8 Canada Square and Barclays Bank at One Churchill Place. Just three miles from the capital's traditional financial center, Canary Wharf has already overtaken the City of London to become the largest financial, legal and media employer in Europe, shifting the city's economy to the East.

More than 120,000 people go to work in Canary Wharf every day, and rising. While finance is the dominant sector, the estate is continuing to diversify, particularly as a hub for design and technology. Almost half (45 percent) of businesses are now non-financial in nature and more than 7,000 tech professionals work full-time in Canary Wharf, thanks partly to initiatives such as the Level39 tech community supporting local innovation.

Growing community

The regeneration of Canary Wharf has had a beneficial economic and social impact on surrounding areas and East London as a whole, creating jobs, improving infrastructure and facilities and helping to establish the East End as a competitive destination not only in London, but on the world stage.

New and existing residents can benefit from a growing array of lifestyle amenities on their doorstep, including 5 shopping malls and 940,000 square feet of retail, dining and leisure space. Local parks and gyms and a year-round events program make Canary Wharf a highly prized residential address, not to mention the convenient transport access to neighboring districts and some of London's finest schools and universities.

Residential developers are meeting the high demand for property in Canary Wharf with high quality developments targeted at professionals and their families. The most striking of these is Landmark Pinnacle by Chalegrove Properties, which occupies a prime location at the western end of South Dock and will be one of London's tallest residential towers when it completes from 2020. This new landmark will usher in the new wave of developments capitalizing on Crossrail and the continuing success of East London's CBD.