Despite the enormous impact COVID-19 has had on the economy, effectively shutting down the housing market for months, the effect on property investors is mixed. 26% say the pandemic has had a positive impact on their investment, while 28% say it has had a negative impact, and 44% say it has had no impact. This means their short and mid-term needs will be varied and wide-ranging.

Challenging conditions due to the pandemic resulted in a 13% contraction in new lending in 2020. This was driven mainly by a sharp drop in remortgaging activity, which accounts for the lion’s share of new business. Following the initial shock and lockdown, the market has bounced back, particularly as investors sought to take advantage of the temporary reduction in SDLT.

It is expected the market will return to more normal levels of growth in 2021 but competition and product availability has worsened as lenders respond to heightened uncertainty and the threat of rising arrears and bad debts. Emergency measures introduced to protect renters have left landlords more exposed to the economic fallout and have highlighted grey areas regarding tenants’ and landlords’ rights.

However, faster-than-expected recovery and encouraging conditions could boost the market in 2021. Unprecedented levels of savings have accumulated during the pandemic by high-income households, which are key for growth in this sector. Potential investors see COVID-19 permanently changing the housing market, but also creating new prospects to invest. Seizing the right opportunity is the primary motivator to invest in property, which means changing lifestyles due to the pandemic could result in more people considering purchasing investment property.

Key issues covered in this Report

  • The impact of COVID-19 on the property investment market and existing investors.

  • Existing investors’ short-term plans.

  • Motivations to invest in property among existing and prospective investors.

  • Interest in different types of property investments.

  • Attitudes towards investing in property, including how COVID-19 will change the market.

Market context

The first COVID-19 cases were confirmed in the UK at the end of January 2020, with a small number of cases in February. Rapidly rising case numbers led to the first national lockdown, starting on 23 March. It was not until 15 June that non-essential stores were allowed to reopen, followed by pubs, restaurants, hotels and hairdressers on 4 July and many beauty businesses on 13 July.

By September, it had become clear that the UK was at the start of a second wave, and social distancing measures were intensified. Continued increases in infection numbers led to Wales implementing a two-week national lockdown from 19 October, England announcing a month-long lockdown from 5 November and Scotland introducing a new five-level system of coronavirus restrictions.

Despite these restrictions, however, case numbers continued to increase. All four UK nations tightened restrictions further in January 2021, effectively leading to a full UK-wide lockdown.

On 22 February, Boris Johnson announced the roadmap to an easing of restrictions in England, starting with the reopening of schools on 8 March, followed by easing of restrictions on outdoor gatherings on 29 March, and with a hoped end to all restrictions by 21 June. The Welsh and Scottish governments also gave more details on their plans to ease restrictions, with both nations taking a slightly more cautious approach to the one planned for England.

The UK’s vaccination programme started on 8 December 2020, with the Pfizer-BioNTech, Moderna and Oxford-AstraZeneca vaccines licenced for use in the UK. The government aims to offer a first dose of the vaccine to all adults by the end of July, having reached its target of offering one to all over-50s and in priority groups (a total of 32 million people) by mid-April.

Economic and other assumptions

Mintel’s economic assumptions are based on the Office for Budget Responsibility’s central scenario included in its March 2021 Economic and Fiscal Outlook Report. After the fall of 9.9% over the course of 2020, the scenario suggests that UK GDP will grow by 4% in 2021 and 7.3% in 2022.

GDP is not expected to return to pre-COVID-19 levels until the second quarter of 2022, although this is six months earlier than the OBR forecast in November 2020, mainly because of the faster than expected rollout of vaccines.

Unemployment is expected to peak at 6.5% in the fourth quarter of 2021. As with GDP, this is more positive than the OBR’s November forecast, but the OBR does raise the prospect of long-term scarring on employment, especially in the more exposed retail and hospitality sectors.

Products covered in this Report

The main focus of this Report is on residential buy-to-let. Additionally, the consumer research also considers other types of investment property such as second homes, holiday lets and commercial property let.

Mintel uses the following definitions:

  • Buy-to-let properties are properties bought with the purpose of renting them out. They may be purchased outright or with a mortgage. They may also be inherited or have previously been used as a main residence.

  • A buy-to-let mortgage is a special type of mortgage advanced on a property that is, or is intended to be, let to tenants. Viewed as a form of commercial lending, buy-to-let mortgages fall under the remit of the PRA.

  • A second/holiday home is defined as a property that is not the ‘sole or main residence’ of an individual. A second home mortgage is a type of residential mortgage for buying such a property. Some homeowners release equity in their ‘main residence’ home to fund or part-fund a second-home purchase.

  • Holiday let property is where a property is let for the purpose of a holiday or short stay only. Many owners of such property advertise on a holiday letting platform, such as Airbnb and

  • ‘Property investor’, in the context of this Report, refers to an individual who owns a residential or commercial rental property or a holiday let property in the UK or abroad. This includes people who own the property through a company limited structure.

  • ‘Second home owner’ refers to an individual who owns a second home predominantly for their own use, such as a holiday home or a second residence used for work purposes.

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