According to Jones Lang LaSalle (JLL), the UK economy will grow in 2021 but will not recover to pre Covid-19 levels until mid-2022. JLL mentions that the economy will grow strongly in 2022 before GDP growth reverts towards its trend rate of growth between 2023-2025.
In addition, JLL also mentions that unemployment will continue to rise in 2021 because of the removal of furlough and disproportionate impact of the COVID pandemic on some industries. Knight Frank suggest that the end of the furlough scheme will not necessarily have a materially negative impact on house prices.
Sterling will gradually begin to appreciate against the US Dollar as greater certainty returns to the UK economy attracting foreign investors. Since 31st December 2020 to March 2021, Sterling appreciated against the dollar by 4.4%, from 1.35 to 1.41 GBP/USD.
Covid-19 daily cases have dropped to 6,391 (3/3/2021) compared to the peak on 11/1/2021 of 55,000 daily cases, an 88% drop from the peak.
More than 20 million people have received at least one dose of the coronavirus vaccine.
The government aims to offer vaccines to 15 million people – those aged 70 and over, healthcare workers and venerable people were vaccinated by mid-February.
The rollout is now being expanded to include those aged 60 and above and those with underlying health conditions. The rest of the over-50s will follow, with government aiming to offer vaccination to everyone in priority groups by 15th of April.
Residential – London update
According to JLL the Greater London housing market is expected to show its resilience with prices remaining flat in 2021 before growing strongly again from 2022 onwards.
Knight Frank also expects prices in Central London to be broadly flat in 2021, with a forecast of 1% growth reflecting the greater resilience of the economy in the capital.
The acute housing undersupply issue in Greater London will be exacerbated by COVID-19 with new housing starts falling to an average of 12,500 per year, compared with a housing need for 52,000 homes per year. This will underpin price and rental growth in London.
Prices in Prime Central London have dropped in 2020, and according to JLL, prices and rent will begin to grow again in 2021. As the downturn begins to diminish, global wealthy investors will turn their attention to Prime Central London, one of the world’s most exclusive housing markets, as they did after the Global Financial Crisis in 2009.
Knight Frank forecasts that between 2021 and 2025 prices in Prime Central London will outperform the market, with a cumulative increase over the period of 25%. The cumulative price increase in Prime Outer London from 2021-2025 is expected to be 23%, meaning prime London markets will outpace the UK.
The housing market has been protected from the immediate effects of the pandemic by measures like the stamp duty and mortgage payment holidays, as well as government reliefs and loans.
It is widely expected that prices will start to recover around Q3-Q4 2021. Many economists and real estate professionals mention that we would see a fast recovery once vaccine is available and the pandemic is over. We have seen this in the UK as there has been extremely high demand and volumes since the market reopened from the March lockdown. Confidence in the market is also evident from the rise of Sterling.