“Stay home. Protect the NHS. Save lives”, was one of the first slogans in the wake of the coronavirus (COVID-19) pandemic. Staying at home, working from home, and shopping online turned into the norm for many people in the United Kingdom (UK) in 2020 and the beginning of 2021, eventually prompting and accelerating different trends in both the residential and commercial real estate markets. Additionally, the UK real estate market was hit by the
, and the waning investor confidence. In March 2020, the FTSE Index experienced the
.
After a tough year, the commercial real estate sector is showing signs of recovery
Though commercial real estate investments took a hit during the pandemic, the gradual lifting of travel restrictions and the progress in the vaccination rollout have been showing effects and
investment activity picked up in the second half of 2020. The period has also been favorable for the industrial real estate sector, which
outperformed office real estate as the most popular asset class. According to a survey among self-storage operators, the coronavirus pandemic has had
mainly a positive effect on business. While this might be the case for industrial and logistics, the office and retail sectors were affected negatively. Office real estate take-up, for example, was
down in almost all UK markets in the first quarter of 2021, while
vacancy went up. For retail properties, the pandemic meant suspending operation, following strict restrictions, and facing a decline in footfall and revenues. This led to a
rise in defaults, increased investment risk, and
lending margins. Between 2019 and 2020, the lending margin of prime retail real estate rose from 2.5 to 3.32 percent.
How has the coronavirus pandemic affected the UK housing market?
In July 2020, UK Chancellor Rishi Sunak announced a stamp duty holiday to boost the property market after the initial hit of the pandemic. Additionally, financially secure home buyers have been able to take advantage of a government guarantee scheme for a five percent down payment and
record low mortgage rates. These measures, combined with the shortage in supply, have led to a
surge in house prices. Some of the cities experiencing the largest price growth as of April 2021 were Liverpool, Manchester, and Nottingham. Between December 2019 and December 2020, house prices rose by over eight percent which was the
highest annual increase since July 2014. Despite homebuyers rushing to complete the purchase before the end of the tax break period in June 2021, the number of mortgage approvals in 2020 was
well below the five-year average. While house prices grew, rents followed the opposite trend. In London, which is the hottest rental market,
apartment rents decreased on both annual and five-year basis as of the third quarter of 2020.
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