Prime Property Prices: How the Pandemic Has Affected Valuations in Top UK Cities

The past year has been a strange and volatile time for the property industry. UK house prices in 2020 fluctuated wildly, and issues such as halted labour and the availability of materials presented challenges. Property valuation had never been so difficult, nor so unpredictable. Now, in 2021, how have things changed? Join us as we take a look at valuations in top UK cities, including prime London property prices.

London and the river Thames

UK House Prices in 2020

When the first national lockdown began in March 2020, it spelled trouble for the property industry. With the market temporarily shut down, properties and developments both large and small stood in limbo.

Initially, in April 2020, we saw a decrease in the growth rate of UK house prices as demand lessened and lower-value transactions dominated. We also, inevitably, saw fewer completed property transactions as restrictions meant the sector couldn’t operate as normal.

Later, as the market reopened, the pent-up demand for property created a surge in both property prices and transactions across the UK, also fuelled by the property transaction tax holiday introduced in July 2020.

At the close of the year, property valuation across the UK remained difficult to predict and as an added complication, both mainstream media and experts were predicting a crash in 2021, with house prices set to plummet to rock bottom.

UK House Prices in 2021

With the ‘stamp duty holiday’ due to abruptly end on 30th June, we are at a pivotal moment for the property industry. So, are warnings of a downturn in the market coming true?  Let’s take a look at some key property hotspots and how they are faring.

London Prime Property Prices

Although some property developers in the capital have had to navigate down valuations in recent months (as with our Deal of the Month for May), current trends suggest valuations are once again on the rise. Savills reported 0.6% London price growth in Q1 2021, with the largest growth seen in outer London. Meanwhile, London prime property prices increased by 0.4%.

This is the first quarterly price growth seen in the capital since early 2020, when property transactions and valuations peaked with the market’s post-lockdown reopening.

“With valuations once again on the rise, property developers will likely enjoy good returns without the risk of Covid-related complications as they prepare for sale. All signs point to a recovering – and expanding – market. So, prime London still represents a good opportunity for investors and developers alike.”

Tom Lee, Pure Structured Finance

Birmingham Property Prices

With property demand in Birmingham outstripping supply, it is no surprise to see resilience in the market. Throughout early 2021, property prices have remained fairly flat, and many believe the Birmingham property market is primed for accelerated growth in the months and years to come – with predictions of growth as high has 24% over the next four years.

With lower-than-average property prices and high investor appeal, Birmingham seems a key location for large-scale economic expansion. Ian Cornock, head of UK regions and Midlands at JLL, states:

“Birmingham has held a long-term and far-reaching appeal for both international and domestic investors. In addition to its inherent fundamentals that attract capital, the significant yield compression seen in key European cities has created a notable arbitrage with the UK on a risk-adjusted basis which is leading European and global investors to look towards cities like Birmingham in the search for yield.”

Manchester Property Prices

Manchester fared particularly well with the peaks and troughs of 2020, ending 2020 with a reported annual property price growth of 5.9%.

Predicted 2021 capital growth in the UK’s North East region, including Manchester, is estimated at 3.5%. This is considerably higher than London – at 2.5%. With its high development potential and high yield opportunities, Manchester is gaining popularity and could be a strong investment opportunity for 2021 and beyond.

Property Investment in 2021 – and Beyond

With valuations stabilising in key locations across the UK, the future of prime property investment is looking particularly bright for the second half of 2021. As always, we recommend sitting down with an estate agent or property expert to help inform your decision and gain a clearer picture of the local market, before making the decision to invest.

Finance For Your Prime Property Development

To guarantee seamless development and the best returns, you will need a bespoke finance package. With our wealth of industry experience and our relationships with trusted lenders, we can secure the development finance you need. If you are embarking on a new development project, or need finance for a property purchase, talk to our dedicated team today.

You can reach us on 02080 579 178, or request a callback and we will be in touch.

Article By Andrew Hosford

June 22nd, 2021

Andrew is a Director within Pure Structured Finance and a founding member of the company.

He previously spent a decade with a real estate advisory firm where he was a Director focused on arranging finance for property investors and developers across all asset classes.

See more articles by Andrew