10th March 2021 by Hugh Obbard 0
Good news flash


Positive signs ahead

Since our February commentary, we have seen more data on how the market performed in 2020 and have a clearer idea on how it is likely to perform this year. Influential to this was the budget on March 3rd. Furthermore two key studies released this month by the OBR show both consumer and business confidence back to pre-Covid levels with anticipation of a huge surge in economic activity as we come out of lockdown. As a country, we also have an opportunity (albeit a rare one) to feel proud of our performance amid this pandemic thanks to the vaccination programme.

We gather quite a few did not receive the February comment and we apologise if this was the case. It can be viewed here however.

Market health report

2020 was the first recorded time when property prices rose in a recessionary year. Taking the various market trackers together, the UK house price indices rose somewhere between 7-8% last year. This was quite an extraordinary performance given the circumstances. Reasons are varied, but key to the context was the high level of optimism at the very start of 2020, following the election on Dec 2019, coupled with all-time low interest rates. As we moved further into the year, government intervention by way of the extension of help-to-buy and the stamp duty suspension on the first £500,000 was highly influential. The latter gave an immediate £15,000 saving in a market where the average national house price is £231,068 (Nationwide’s February figure). Nationwide’s data for January and February show house price growth at -0.3% in January and 0.7% in February.

By contrast, Savills’ figures report prime central London showing -0.4% for the year. They split the prime regional markets (£1m +) into two with an overall 3.6% growth but rising to 5.5% for £2m + county houses. Most striking perhaps is their data relating to how the prime markets have started 2021. For properties valued in excess of £1m they report agreed sales in January at 47% up on 2017-2019 levels. The second half of 2020 saw 56% overall. Meanwhile new instructions in H2 2020 were up 37% but 2021 has started with a drop of 7% in January and 6% in February. They believe there are clear signs of the prime market’s perennial issue of supply constraints being exacerbated.


Budget report

Budgets are always a time for nervousness and with additional Government borrowing of £280bn in 2020 and overall debt approaching 100% of GDP, there was a great deal of apprehension prior to the statement on 3rd March. In short, it proved to be more about near term support measures but within a couple of years the squeeze will commence. The most striking announcement was the reversal of the policy to reduce corporation tax and this will go back up to 25%, from the current 19%, in 2023. Many expected significant changes to capital gains tax but there was no mention at all about this. In fact the budget was seemingly so cleverly put together that the opposition parties could barely find an argument to denounce it and the extreme Tory tax liberals were surprisingly mute.For property, the good news was an extension to the stamp duty suspension. Summary as follows:
  • When buying a main home before June 2021 there will be no stamp duty due on the first £500,000
  • Between 1st July to 30th Sept no stamp duty will be charged on the first £250,000
  • Those buying second homes will still pay the 3% surcharge on the total.
  • From 1st April an additional 2% surcharge, announced last year, will become due from non-resident buyers.

An additional announcement was a government backed mortgage scheme to allow first time buyers to buy property with just a 5% deposit.

Covid report

The government’s roadmap to ending lockdown took its first step on March 8th with schools opening. Step 3, targeted for May 17th, is the most keenly anticipated as this is when international travel is set to resume and pubs, restaurants and hotels re-open fully. Meanwhile, the vaccination rollout is exceeding expectations with around £22m first doses administered at the time of writing and the expectation that all over 50s will have received a vaccine ahead of schedule before the end of April. The efficacy of single doses is proving to be much higher than first thought. Much concern remains about new mutations but so far these have not been proven to negate the vaccine. Latest data has shone a light on quite why the UK was at the top of the table in terms of deaths and hospitalisation. A recent study has highlighted a very clear link with obesity levels and deaths, the UK ranks 4th in the global table for obesity. Clearly there were other reasons, particularly with decision making in the early days, but Covid definitely seems to have picked on the the old and unhealthy.

Market prediction update

There is very much a ‘despite Covid’ feel currently. If one can put aside the horrors and consequences of the disease just for a moment, we have seen a remarkable resilience over the past 12 months. The UK economy was hit very hard and with GDP falling close to 10% we were hit as hard as any. However, thanks to certain government action (Rishi Sunak really is the golden boy, as his Instagram account shows!), an extraordinarily compliant nation (no riots here unlike, Barcelona, Amsterdam, Marseille, Berlin etc.) and a stubborn positivity, we start 2021 in a much better place than we could have dared imagine.

Further Government support, both through the furlough scheme and government backed mortgages, will undoubtedly help the domestic housing market. My prediction of a 5% fall in national house prices has therefore been deferred, for now. Repeat lockdowns and fundamental changes to working practices, has enabled many to take stock of their lives and where/how they live. We see a continuation of the churn within the prime markets as large flats are exchanged for houses or central London homes are exchanged for country homes with a London pad. The younger generation will still see city living as their choice, so the ‘affordable’ city locations will do well, thanks to Government intervention and the continued input of the bank of mum and dad. With spiralling stamp duty rates on second homes, I had predicted the return of the pied-a-terre as smaller space is deemed sufficient for homes used temporarily, I am certain this will be further boosted as the ‘country home plus London pad’ option becomes more common place. Core central locations will benefit.

Prime central London does now stand out as a ‘buy’. Having peaked in 2014 and seen prices adjust by around 20%, it is rare amongst global prime markets to show such a material adjustment. Added to this is a relatively strong real yield. In an era where negative interest rates are much discussed, a 2% net yield is a genuine return. Sterling, having recovered a fair bit since the Brexit outcome was nailed down, offers value to overseas buyers. Nearly 12 months of severe travel restrictions has seen a significant pent-up demand develop and surprisingly little stock in the key locations is there to satisfy this. The hasty and foolish will no doubt buy fringe new developments with little likelihood of making any return on their investment for a long, long time to come. Meanwhile there is the spectre of inflation in the years ahead and if anything, property has proven to be inflation’s friend, but ‘buying well’ and not just ‘buying’ is key to protect your investment and benefit from this next cycle.


2020 started with great optimism in the country and this turned quickly to extreme apprehension followed by a period of fear. However, for us, we maintained a good spirit and like most we adapted to a mix of WFH, Zoom meetings etc. We were fortunate to be within a sector that was deemed necessary and which remained open. We ended the year having not had to furlough any staff, in fact we added to our headcount. We bought, we sold, we let and we refurbished ‘despite Covid!!

In fact we take great pride in our rental portfolio occupancy in what has been an extremely challenging market. At one point close to 30% of our tenants were not in occupation, mostly back in their own country, but still paying full rent. As with previous times of extreme challenge, we were quick to anticipate, rather than react. We dropped rents fast to retain or get new tenants in and avoid painful void periods. In most cases we have clauses allowing landlords to increase rents or regain vacant possession in the event of a V shaped recovery. Meanwhile our refurbishment team have worked flat out and completed more projects than ever. Acquisition activity was heavily constrained by travel restrictions but we kept close to our average number of purchases. Our most recent activity has been handling the sales of our clients’ properties. The resilience of the market was very apparent and this has been an extremely successful additional feather to our bow!

You can see some of our latest design and build projects at www.obespoke.co.uk

If you would like more information,

do get in touch on +44 (0)20 7349 8920 info@obbard.co.uk

Keep safe!

NOTE: The opinions expressed are solely those of the author and are not intended to offer any advice, formal or otherwise, on the nature of property investment. All the information is provided in good faith for general interest only. Recipients who have not formally appointed Obbard are advised to seek independent professional advice and to satisfy themselves on the state of the market, the opportunities and risks.
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