UK Property Investment Predictions for 2021 have you got any thoughts?
What have you decided as your property investment goals for this year?
In this post I want to give you my perspective on how I think 2021 will be for property investors. If you have not set your goals yet, hopefully today’s post will help you you create them or clarify the ideas that you have.
If you have already set your goals for this year (excellent well done) then you can use this post to assess everything. I don’t want you to go down the wrong path with your property investment this year (or any year come to that!).
I want to share my predictions with you for the UK property market in 2021. All of these predictions are my opinion of course, but I do keep close tabs on the market and have been right with my predictions in the past (not all of them of course).
There is no doubt that 2021 will be an interesting year for all of us. With the Covid-19 pandemic still raging on, the good news is that the vaccine roll out is progressing in the UK. It is going to take a few months to complete due to the millions of people that live here. Nevertheless, it is good news as a positive step forward to getting life back to some form of normality again.
UK Property Investment Predictions for 2021
1) House Prices
Last year saw record levels of property transactions despite the Covid-19 pandemic. But in 2021, I expect to see a bit of a slowdown. According to Rightmove, there will be house price growth in 2021 of around 4%. London estate agent, Savills, predicts that there will not be any house price increases at all in 2021. I tend to side with Rightmove here.
Many of the other “experts” predict that it is going to take until 2022 to see house price growth again and some are expecting house prices to fall in 2021. I think that this is particularly pessimistic given the good news about the Covid-19 vaccine. At the time of writing, the UK is in a lockdown situation again, but there should be some easing of this fairly soon.
Once there is an easing of the lockdown rules, I see another “pent up” demand situation happening where there will be a high level of property transactions. The vaccine has restored hope among those in the property market and at some stage of 2021 there is very likely to be a surge of property transactions.
2) Brexit Implications
Now that the UK has officially left the EU there is still a lot of uncertainty about how it will affect the property market, if at all. I do not think that it will have that much of a negative impact on the UK property market. There are likely to be some ups and downs in 2021 over Brexit, but I believe that in general these will not affect the property market too much.
Brexit is likely to affect a small sector of the population rather than the entire population. There will probably be some fears over job losses due to Brexit, but these are not likely to be anywhere near as drastic as the effect that the pandemic has had on the economy.
I am not saying that you should ignore Brexit altogether here. It is important that you keep an eye on things and assess how any changes will affect your property investment business. However, I do not think that Brexit will be as catastrophic for the UK as many were predicting.
3) Overseas Investors will Drive the Market
Many overseas investors still consider that the UK property market is a safe bet. The pound has weakened against several currencies in the past year and this has attracted a lot of interest in the property market.
The UK government will provide a special visa arrangement for Hong Kong citizens at the end of January 2021. This is a special visa which can lead to UK citizenship for people living in Hong Kong. I expect many “well off” Hong Kong citizens to take up this offer as they see it preferable to living under Chinese rule.
Therefore, you can expect to see a high level of transactions from Hong Kong in the UK property market this year. This will help to stabilise house prices and could provide more opportunities for property investors here.
Investors from other parts of the world are still likely to show an interest in the UK property market. They see it as very resilient and the fluctuating pound makes investing in property here very attractive. Don’t see overseas investors as a threat to your property investment business. Welcome them with open arms!
4) Private Rental Sector will remain Strong
The last 6 months of 2020 saw strong growth in the private rental sector. During certain months of 2020, the demand for private rental accommodation was as much as 20% higher than it was in 2019. I can see this continuing in 2021. If you can provide high quality private rental accommodation in a popular area then you should be on to a winner.
Demand for private rental accommodation should remain strong in 2021 as there is still a lot of uncertainty about job security due to the Covid-19 pandemic. It will still be difficult for many people to purchase their own homes in 2021. They will probably not have enough savings for the deposit. Interest on savings accounts these days is at a record low.
As life starts to return to normal in the UK with the Covid-19 vaccine roll out you are likely to see more international students and also an increase in corporate tenant demand as well. There will always be a strong demand in the UK private rental market and I see no reason for this to fall in 2021.
The pandemic has resulted in a lot of people making the transition to working from home. Many tenants are now looking for larger accommodation as they want to feel more comfortable working from home. They also want improved Internet connectivity so that they can perform their work more efficiently.
I would strongly advise any property investor that wants to follow a buy to let strategy to invest before the stamp duty holiday ends at the end of March. There have been rumours that the Chancellor will extend the stamp duty holiday because of the continued pandemic, but I urge you not to rely on this.
5) The Build to Rent Opportunity
Tenants want more from their private rented accommodation. They want high quality accommodation that provides the space that they need. Tenants also expect that the accommodation will be to a high standard with good décor, a pleasant outdoor space and high-speed Internet.
Because of changing tenant demands, the build to rent sector experienced significant investment last year. I can see this sector growing even further in 2021. With build to rent, the focus is on new developments that offer tenants higher class living accommodation which includes the space that they need to work from home.
If you can get involved with build to rent property investment opportunities in 2021 then I believe that you will be on to a winner. Tenants are demanding a lot more these days (and rightly so) and if you can supply them with what they want then you will see some good returns.
6) Availability and Rates for Mortgages
It is extremely unlikely that the Bank of England will raise the interest rates in the first few months of 2021. This means that the current low interest mortgage deals available will continue for the foreseeable future.
Lenders had a crisis of confidence when the pandemic first started around March of last year. A lot of them withdrew all mortgage products but this soon changed with the lockdown easing. Now that the lenders know more about the Covid-19 pandemic, and are aware that the vaccine should improve things, I see good mortgage deals continuing in 2021.
If you do not have a good mortgage broker as part of your property investment team yet now is the time to get one. They will know what deals are available for property investors such as buy to let mortgages. It is worth paying a little extra to these experts to find the best deal for you.
7) Tax Changes
The UK government has spent a fortune on the Covid-19 pandemic. Their job protection scheme has cost billions and is still continuing. They have lost a significant amount of income due to the stamp duty holiday as well. At some stage, they will need to make changes to claw some of this money back.
There could well be some more taxation changes that impact buy to let investors in 2021. Private landlords in the UK have had to endure a number of tax changes already and have changed the way that they operate to accommodate this. If you are a buy to let investor you need to monitor any potential taxation changes and adapt your strategy to cover these.
Another area of taxation that is likely to see some changes is Capital Gains Tax (CGT). Again, you need to keep your ear to the ground and work out how any changes to this will affect you. If there are any changes to CGT, they are likely to be increases for second home owners. You have been warned!
Final Thoughts on my UK Property Investment Predictions for 2021
I feel that there is certainly cause for optimism for property investors in 2021. Things may look a bit bleak right now, but lockdown easing and the Covid-19 vaccine should drive up demand in the UK housing market.
As always, you need to consider all of your investments carefully this year. I sincerely hope that my take on things for 2021 was of use to you. My prediction is long term property investment is still the best option for 2021.