Alliance Property Group Market Review; Q3 2021

By Gordon Campbell

September 2021

Has Covid adversely affected the property market in Glasgow?

Absolutely no, quite the opposite! It is booming!

The sales and rental property market, particularly in Glasgow has been booming despite the headwinds the world has faced in the last 18 to 24 months.

We look at why that is the case, the latest economic and property data and what are the forecasts.

UK Economic Overview

There is now a genuine sense of hope that the worst of the Pandemic has passed, and that we can begin to think about moving on with our lives.

The ongoing vaccination campaign has weakened the relationship between infection and hospitalisation, resulting in an increase in the number of people admitted to hospitals.

Restrictions around the UK have been loosened, allowing for a return to near-normality.

The world is still living through the pandemic and more than a year on from its start, coronavirus continues to exact a heavy toll in lives and livelihoods.

Around the globe, more than 100 million people have had the virus and around 2.5 million have died from it, and world GDP fell by 3.5% in 2020 as governments imposed public health restrictions in an attempt to control the virus.

The UK was hit particularly hard with GDP falling 9.9 per cent in 2020, the largest decline in the G7 and one of the fastest.

But it might also be one fastest of the big players to recover.

The IMF's updated forecasts also anticipate the UK growing by 4.8% in 2021, implying that the UK economy will regain its pre-COVID levels around the turn of the year.

UK GDP

Since the relaxation of restrictions across the UK the economic outlook has improved and GDV projections have been adjusted.

The economy grew by 4.8% between April and June according to the Office of National Statistics (ONS) with this expansion in GDP being driven by retail, restaurants and hotels.

The consumer has led the way, driving output to within 5% of pre-pandemic levels.

Deloitte are projecting stronger growth in the UK than previously projected in light of better than expected data in March and April and the relaxation of restrictions.

Overall the market has proven to be remarkably resilient and such projections have so far proven to be unfounded.

In fact, the UK property market has seen a phenomenal recovery since the industry was effectively shut down during the first national lockdown in 2020, with demand and house prices running at unprecedented levels.

The Current UK Property Market

There are various reasons why prices have been saved from falling during the pandemic, an important one is the combination of low interest rates and a stamp duty holiday.

There is strong evidence that low interest rates have a major effect on prices if supported by adequate mortgage credit.

And when transaction costs were lowered by the suspension of Stamp Duty and LBTT in Scotland in July 2020 housing sales rose sharply, which is likely to have further shored up prices.

How pre and post Covid differ from the 2008-2009 economic crisis?

A lot of people have been comparing the latest economic crisis with 2008-09 but the current situation is different.

Banks saw a great deal of their capital destroyed in the financial crisis and most non-bank lenders were forced out of business.

This created a drag on the economic recovery as lenders were still trying to shrink their balances sheets, which impacted the speed of the recovery in mortgage lending and house prices compared to the mid1980s and late 1990s.

By contrast, today lenders are well capitalised, wholesale funding markets are functioning effectively and house prices have not fallen during the Covid-19 crisis. 

But this is not the complete picture.

Another main driver of housing demand and price inflation is household disposable income.

This was much less affected than GDP in 2020, having been supported by the government furlough scheme.

By the end of the year, it had returned to its pre-pandemic level.

Current Price Levels

In their June UK house price index Zoopla report that current UK house price growth stands at 5.4% with the current average value of a home standing at £230,700.

Looking ahead to the short term they remain bullish and are projecting price growth of 6% by the end of the summer before it slows during Q4 and drops back to somewhere between 4% and 5%.

They also expect the headline index figure will continue to rise in the coming months peaking at 6%, as the more competitive market conditions in Q2 filter through.

The Glasgow Property Market

Scotland and specifically the Glasgow property market much like the wider UK market has proven to be remarkably resilient over the last eighteen or so months with prices growing strongly in most areas.

Some of this inflationary heat was created by a supply demand imbalance caused by the market being constrained by lockdown restrictions and a build-up of pressure and demand during said restrictions.

Transaction levels are also down when compared to more “normal” times.

Registers of Scotland report that average prices in Scotland increased by 12.1% in the year to May 2021, up from an increase of 7.2% in year to April 2021.

Scotland house prices were growing faster than the UK annual rate of 10.0% in the year to May 2021.

Regional House Price Growth- Scotland

Prices increased over the year in 31 out of 32 local authority areas.

Our main focus investment area, Inverclyde, annual increase was 3^rd highest at 13.9%.

The largest growth was in South Ayrshire (not including Orkney Islands) where prices increased by 16.0% in the year to March 2021 to £153,000.

The lowest annual growth for the year ending March 2021 was recorded in City of Aberdeen where average prices decreased over the year by 0.6% to £140,000.

House Price Forecasts UK and Scotland

The continued strong price increase for Scotland and Glasgow continues with a near 25% average increase in the next 5 years.

Glasgow Rental Market

The rental market has been as equally strong and buoyant as the property sales market.

The Scottish lettings market sprung to life in the latter stages of Q2 2021 as COVID restrictions eased

and students, who had delayed securing accommodation for the next academic year, increasingly found confidence to take up their leases.

Properties of all types, 1-4 beds, posted positive annual growth taking the overall Scottish average to an all-time high of £883 per month.

The Glasgow rental market continues to operate at pace with very high demand relative to supply pushing average rents 8.9% higher year on year.

Glasgow stood alone amidst Scotland’s major cities again recording growth across all property (1-4 bed) types.

Source: CityLets

Inverclyde Area Rental Market

Our main investment area for you Inverclyde, is also enjoying the huge demand in rental properties due to the large increase in job creation and the specialist jobs being created in the marine, healthcare and distribution industries in the area.

We have very close ties with many organisations looking to secure our properties we sell to you on long term contract for the blue collar workers on a long term basis of about 5 years and at rents above the market level.

Summary

What we do for you is unique and exclusive.

Despite the on market property sales still being strong and challenging with under supply, high asking prices above market value, we still provide you a One Stop Solution and:

• strong and constant supply of off market and below market value properties
• properties offered on a weekly basis
• price range on average of £25,000 to £50,000
• High proportion below £40,000 so no stamp duty to pay
• High demand areas for sale and rent
• In areas of strong capital growth
• We share our 38 years’ experience, knowledge and expertise.
• We share up to date market information and blogs
• Access to a great power team: solicitor, letting agents, refurbishment teams, accountant and finance brokers.
• High quality of service and communication.
• Building long term relationships.

Regardless if a new or experienced investor what we provide is for everyone.

If we can help in anyway or want to discuss anything just contact us and we would be delighted to help.

Thank you for reading.

Gordon and James.

Alliance Property Group. Making a Difference