To Sell Or Not To Sell: How The Pandemic Is Changing The Property Market

COVID-19 prompt landlords to sell London properties, invest in more spacious properties in the boroughs and increase tenancy lengths

More landlords are offloading rental properties in London to deal with financial pressure from the pandemic. Property owners selling London properties have been increasing year-on-year, but the coronavirus has doubled this figure in 2020. 

Even before the pandemic, about a third of landlords have expressed plans of offloading properties due to changes in regulations and taxes. We Buy Property, which typically purchases properties below market values from cash-strapped property owners, are now being approached by landlords looking to sell their property quickly before they lose more money from defaulted rent payments. 

On a positive note, there are also record numbers of London properties sold as investors rush to secure property in the UK before Brexit concludes in January.

Property investors are taking advantage of the stamp duty holiday and overseas buyers are likewise closing deals ahead of the implementation of the additional 2% stamp duty by April. As a result, the HMRC saw a surge in residential transactions this September which was 21.3% higher compared to August.

These are not the only changes brought on by the pandemic. There has been a shift in demand as buyers are searching for houses instead of flats and moving out of central London into the surrounding boroughs. 

The Race For Space

Zoopla data show that houses are selling 33% more than flats as people search for bigger living spaces to cope with lockdown measures. Searches for rental properties in Zoopla reflect this desire for larger properties and outdoor spaces with terms like balconies and gardens. Potential tenants are also looking for houses with garages as well as a backyard for pets.

With work-from-home orders in place, having a comfortable space to work is more important than the location of the house.

As such, more London residents are selling their houses and moving to the countryside giving room for international investors to purchase these properties at or below market price.

Another consequence of this trend is the prevalence of long-term leases. As landlords contend with falling rents and tourism slump, investors in the buy-to-let sectors are placing properties on long-term lettings to cover costs.

Buyers, especially overseas investors, are likewise taking advantage of virtual viewings as an alternative to property visits. The current lockdown will also prevent people from inspecting the property as normal, so this can be an added challenge to the property market. 

Fortunately, there is a silver lining. As early as now, the market is showing signs of recovery as supply gets balanced by rental demand due in part to the falling rents in London. Analysts foresee a continued decline in rent until last quarter of this year before stabilising in the first and second quarter of 2021. Outside of London, the recovery will be much faster, with a 0.7% increase in rental values as of the third quarter this year.

Despite the challenges, tenant demand remains as people’s home-ownership plans are put on hold. With a viable vaccine on the way, employment and earnings are expected to pick up in the next few quarters. People returning to cities will need a place where they can thrive in the new normal.