The conclusion of the December 2019 election and the passing of the Withdrawal Agreement in January 2020 helped to recover market confidence, driving a rapid jump in prices, peaking at 3% in March 2020. This recovery was cut short by COVID-19, but the pandemic’s impact has been short-lived relative to other parts of the economy.

Mintel estimates the market to decline by 21% to £38.2 billion in 2020, primarily driven by the collapse of activity during Q2 2020 due to the initial lockdown, beginning 23 March 2020.

Although government measures advised that construction sites could remain open provided they met Construction Leadership Council health guidance, the majority of housebuilders stopped on-site operations due to initial difficulties in enforcing social distancing measures. COVID-19 is also driving a dramatic shift in favour of agile and remote working practices, as businesses contend with the costs associated with social distancing measures and financial pressures resulting from subdued economic activity.

As demand for office and commercial property in inner-city areas declines, we anticipate demand to grow for developments in city peripheries and commuter hubs where land and house prices are lower. Demand is also expected to rise in ‘second-tier’ cities as the growth of remote working enables a greater proportion of first-time buyers to expand their property search further from their place of work. This rebalancing will lead to opportunities for new residential properties in inner-city areas, where the attractiveness of land and property will face decreased demand in the short and medium term.

Key issues covered in this Report

  • The impact of COVID-19 on the house building market.

  • How COVID-19 may drive a structural change in the market as the popularity of retail and office property in cities declines.

  • Trends in the housing market by region, nation and property type.

  • How political and economic trends have shaped the state of the market and government responses to issues surrounding supply and affordability.

  • The role of Help to Buy in the market and the anticipated effects of changes set to be introduced in 2021.

COVID-19: Market context

The first COVID-19 cases were confirmed in the UK at the end of January, with a small number of cases in February. The government focused on the ‘contain’ stage of its strategy, with the country continuing to operate much as normal. As the case level rose, the government ordered the closure of non-essential stores on 20th March.

A wider lockdown requiring people to stay at home except for essential shopping, exercise and work ‘if absolutely necessary’ followed on 23rd March. Initially, a three-week timeframe was put on the measures, which was extended in mid-April for another three weeks.

The Health Protections Regulations 2020 came into effect on 15th June, allowing the reopening of all non-essential stores in England as well as the mandatory use of face coverings on public transport. Pubs, restaurants, hotels and hairdressers were able to reopen on 4th July, with many beauty businesses following on 13th July.

From 24 July, it became mandatory to wear face coverings in shops and supermarkets. Rules on travel remain fluid: from 10 July, travellers from more than 50 “low risk” countries no longer had to self-isolate for 14 days, but on 28 July the removal of Spain from this list of low-risk countries dominated headlines in the UK, and by August further countries (including France) had been removed.

The ban on social gatherings of more than six people in England, Wales and Scotland came into force on 14 September, and in Northern Ireland on 22 September, although the rules were applied slightly differently in each devolved administration.

On 12 October the Prime Minister announced new local COVID alert levels for England. Each area of England was assigned an ‘alert level’ – medium, high, or very high (otherwise known as the three tiers). People living within high or very high tiers were not allowed to socialise with anyone outside of their household or support bubble in any indoor setting.

Economic and other assumptions

Mintel’s economic assumptions are based on the Office for Budget Responsibility’s central scenario included in its July 2020 Fiscal Sustainability Report. The scenario suggests that UK GDP could fall by 12.4% in 2020, recovering by 8.7% in 2021, and that unemployment will reach 11.9% by the end of 2020, falling to 8.8% by the end of 2021.

The current uncertainty, however, means there is wide variation on the range of forecasts, which is reflected in the OBR’s own scenarios. In its upside scenario, economic activity returns to pre-COVID-19 levels by Q1 2021. Its more negative scenario, by contrast, would mean that GDP doesn’t recover until Q3 2024.

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