It is no secret that the world economy is in a shambles. Besides air travel and tourism, the real estate industry is one of the hardest-hit segments. Real estate prices had dropped the world over during the first quarter of this year.
It was no different in London, and there were forecasts of a fall of up to 10% in 2020 itself. Timely intervention by Chancellor Rishi Sunak by way of raising the upper limit for stamp duty from £125,000 to £500,000 ‘til 31 March 2021 was a great attempt. Ever since the announcement was made, real estate agents have reported a surge in inquiries for homes priced between £400,000 and £500,000.
The impact of the lockdown
Life being what it is, prospective home buyers could not visit houses due to the lock-down. This resulted in a “not functioning housing market,” according to Rightmove. The lockdown came as the real estate sector in London was recovering from the precariousness of Brexit.
Data from July shows quite interesting statistics. The demand from buyers was increasing, but prices continued to fall. Serious watchers of the real estate market in London believe that support measures from the government will begin to get phased out during the last quarter of this year. This can result in prices continuing to fall.
It is only a matter of common sense that low prices should increase demand. But is that going to be the situation in London? The UK think tank RICS (Royal Institute of Chartered Surveyors) warns that credit conditions will restrain new buyers.
Will the London property prices see a silver lining soon? The result of the survey by RICS showed the below result from respondents:
- New buyers increased in July from minus 20% in May and 43% in June.
- The numbers of sales agreements are rising in the national capital.
- This positive trend was visible across the UK, indicating a strong rise in transactions.
The OBR (Office of Budget Responsibility) has predicted a slump up to more than 20% by the third quarter of next year.
2020 and 2021
The real estate sector in London is likely to witness the following in the remaining months of this year:
- Sales will be half compared to 2019.
- As of now, transactions amounting to £82 billion from about 373,000 properties are on hold.
- The prices will drop by around 3% in the UK and 2% in London.
Despite all the doomsday predictions, most experts are predicting a very strong recovery in 2021.