Although Covid has hit the property sector hard, it’s adapting fast and construction is growing – but there will be winners and losers, says Tom Entwistle.
Covid has not been all bad news for UK property: working from home and lockdown restrictions have produced a boom in DIY and home improvement works, while the desire for more space has seen relocation enquiries with the property portals go through the roof. Foreign travel bans have resulted in a boom on the demand for UK holiday accommodation and moves toward suburban / rural rentals.
Britain’s construction sector is also seeing its biggest increase in work in five years. With strong demand for housing and with other projects resuming full working, as the coronavirus pandemic eases, the building industry has not be busier for some time.
Impact of the pandemic
The downside to all of this, as the impact of the pandemic, coupled with Brexit, becomes clear, is the impact on the demand for rentals in inner cities, and the shortage of building and other products and building materials which many economic experts warn is resulting in price inflation.
The lock-down induced DIY and home improvement boom are giving a real boost to companies involved in materials supplies, such as builders’ merchants and furniture stores. Logistics and warehousing companies involved in home deliveries have never busier as people continue to work from home and use their travel savings on this alternative spending.
A Royal Institution of Chartered Surveyors (RICS) survey of its members predicts that profit margins in the building sector will increase for the first time since well before the pandemic as the volume of work continues to rise over the coming months.
RICS Chief Economist Simon Rubinsohn (pictured) says: “The indications are that the (building) industry has adjusted relatively well to COVID-related work practices with most respondents to the survey suggesting only a small hit to productivity,”
In late 2020 early 2021 private residential construction has seen the biggest rise in construction work, followed by infrastructure projects as the government gears-up to fulfil its election promises on increasing spending on infrastructure, especially in the north. Social housing, public-sector works and industrial and commercial projects have all seen increases in activity levels.
The RICS survey which was undertaken over the last couple of months shows that Britain’s property market has performed much more strongly than the wider economy. It’s a result that the RICS largely puts down to the Stamp Duty holiday on house purchases and a sudden rise in demand for larger homes as people look to move out from city centres to properties more suited to home-working.
The pandemic has also resulted in a clear shift in demand away from flat shares with a group of strangers, the traditional first move into city work-life, to rentals as singles, with partners or even returning to live with parents.
The IHS Markit’s Purchasing Managers’ Index for the construction industry shows the biggest rise in activity in the sector since 2014, but RICS points to the shortages in the supply of building materials as the biggest constraint on construction, rather than anything to do with financing difficulties.
The RICS study found the productivity in the sector was down by 5% due to social distancing involved in the Covid work restrictions for workers. However, this, it says, was a smaller impact than surveyors had expected as the lock-down working rules were introduced, and the recent recovery appears to be more than making up for that.