June 27, 2021: Following the latest QIB-UK Real Estate View from London Report, in this issue we discuss the state of the sector almost one and a half years on since the onset of COVID-19, as well as take a closer look at the latest updates around the fight against the pandemic, vaccination pace, the relaxation of travel restrictions, and other factors impacting the London Property market today.
London’s Real Estate Sector Coping with COVID-19
Since the emergence of the Pandemic, the London prime residential markets are exhibiting signs of successfully being able to cope with most of the COVID-related disruptions, supported by the stamp duty holiday in place since summer 2020.
According to data consultancy LonRes, the number of Prime Central London (PCL) transactions that took place in March 2021 is considered the highest since 2016, due to a spike in activity when the 3% stamp duty surcharge was introduced then. Knight Frank real estate agency also said that: “The UK property market sprang into life in March 2021 as the country began to unlock and the Covid-19 vaccine reached more people.”
This sharp improvement in market sentiment can be partly attributed to the success of the UK’s vaccine program and the first signs of travel reopening. This optimism, though, is susceptible to any changes that might occur in the pandemic course.
In fact, the resilience of the Prime Central London and Prime Outer London (POL) markets is not just the result of the relative success of the fight against Covid, it is now clear that the markets did, indeed, enter Q2 with the benefit of a protective buffer of unsatisfied demand, as many had predicted it would. This buffer is expected to persist, if the latest reports from real estate agents describing clients’ eagerness to purchase, once international travel restrictions are relaxed, prove to be reliable.
Property Types & Locations in Demand
Overall, early lockdown enthusiasm for large family homes with good access to open areas such as parks, beaches and countryside, remains in demand. The market is also witnessing demand in East London as the prospect of return-to-work improves. According to real estate agents, there is an increased demand specifically in locations close to employment hubs in the capital city, like Docklands and Midtown, and specific SE/S Outer London locations, such as Clerkenwell, Shoreditch, and Victoria Park.
These locations also have the advantage of shorter average home-to-office commute times providing a better alternative for those who are keen on avoiding lengthy exposures in public places during any future potential virus breakouts or pandemics.
Growing Concerns on Cladding Issues
The COVID-19 pandemic has not alone been dominating the London property news. In fact, media continues to report the consequences of the famous 2017 “wall-climbing” ACM cladding fire at the 24-storey Grenfell Tower in West London.
Nationwide investigations for ACM have given property owners rare access to their properties’ hidden sub-structures. This rare occasion has revealed a number of non-cladding-related structural and fire-safety deficiencies. Accordingly, the UK Government has introduced a range of financial support packages for certain categories of flat-owners facing cladding-related expenditure. However, would-be purchasers of flats in the type of residential buildings that are most likely to include “Grenfell type ACM Cladding” are protected from cladding-related risks by the newly introduced External Wall System Form (EWS1) due diligence procedures. This form enables residential building owners to affirm that their external wall system has been evaluated by an expert to reassure stakeholders.
QIB’s real estate specialists recommend that clients speak with their UK legal advisers if they have any cladding related questions. Purchasers should also be aware that cladding due diligence requirements may delay the purchase process slightly.