Russians are buying Britain again
Russian investors see the crisis and quarantine as an opportunity to invest profitably in property in the UK.
International real estate agency Tranio reports that over the past few weeks they have been approached by large Russian family-offices: investors believe that the current situation will allow to acquire good quality properties at attractive prices.
"Such clients are usually not many - about 15-20%. They are meeting the crisis with cash, ready to take the risk in exchange for the future bonus and are actively looking for projects with a discount - problematic assets, objects where the operators have declared default".
In this article, Tranio analysts discuss the UK property market: what changed in the market during the crisis, what investors should expect and what the prospects are.
How prices and demand for the property have changed
At the beginning of 2020, the average value of residential property increased. The demand for property has also increased
According to Rightmove portal, the average cost has increased by 0.8% throughout the UK, while in London - by 2.7%. At the same time, the transactions were 11% more than in the same period in 2019.
According to the National Statistics Office in February 2020, the average housing prices increased in all parts of the UK: England - prices rose to £ 246 thousand, an increase of 0.8% compared to last year; Wales - to £ 164 thousand, 3.4% more; Scotland - to 151 thousand £, 2.5% more; Northern Ireland - to 140 thousand £, 2.5% more.
In March, due to the pandemic, increased demand for properties has been replaced by a period of uncertainty
According to Rightmove, from March 26 to April 11, the number of unique visitors of the portal decreased by 40%. The number of offers for sale also decreased: from March 8 to April 11, 2020 the portal had only 65 thousand offers for sale, and in the same period a year earlier there were 112 thousand offers. These figures fully reflect the situation, because Rightmove covers 95% of the UK property market.
What can investors receive
The property sector is now frozen and not developing. This will lead to a sharp and short-term decline in property prices. Prices will drop by 4-5% by the end of 2020.
But the country's economy will quickly return to its previous indicators. We forecast that the property market will recover by the end of 2021. The ratio of supply and demand will level off in the short term for two reasons: 1) investors will invest capital in reliable assets - property; 2) restrictions are gradually easing and new supply will appear in the market. By the beginning of 2021 the market volume will recover by 80%.
We expect that attractive offers will appear on the market in areas affected by the pandemic - hotels, offices, shopping and entertainment centres. In some offers, the discount from pre-crisis prices may reach 20%.
The period of economic recovery will not be long. According to the IMF, UK GDP will fall to its highest level by the end of 2020 with a 6.5% decline. A sharp downturn in the economy will inevitably lead to lower property prices. In 2021, the economy will show growth of 4%, and property prices will rise.
To stabilize the economic situation in the country and help businesses cope with the consequences of economic shock, the Bank of England is taking unprecedented measures
On 19 March, the Bank lowered its interest rate to a historic low of 0.1% and increased government bond and corporate bond repurchase volumes to £645 billion. The buyback programme will end when the market situation improves.
The "cheap money" effect is followed not only by reduced credit rates, but also deposit rates. This means that investors will be looking for alternative investment instruments, including real estate.
After the restrictions have been removed and Brexit, the UK property market will return to its previous levels quite quickly. This is facilitated by record lowered interest rates, stabilization of the political situation and the release of deferred demand. The deals will be concluded again, new offers will appear in the market, the level of property prices will gradually recover.