At the start of the year, Knight Frank, a leading international estate agency, predicted a number of markets around the world would see healthy prime price growth. In their Prime Global Forecast for 2020 they predicted that Paris – with a staggering 7% growth – would be the leading city followed by German markets and Miami. However, as we now know, COVID-19 changed everything.
Since the crisis set in, Liam Bailey, global head of research at Knight Frank, has said, “There were positive signs in several markets globally that prime prices would rise throughout 2020 but unsurprisingly, Covid-19 has put a halt to that.” They have since re-analysed 20 cities in light of COVID-19 for this year (2020) and found that 16 of these cities would see flat or low-price falls (below 5%), these include Cape Town and London, while only four cities would see growth, albeit low growth, and these include Lisbon.
However, in their forecast for 2021 Knight Frank have London and Lisbon out front, with strong growth of 5% predicted. Bathurst advises investors to take the long view and focus on what is likely to rebound in 2021. “Over the long term, in spite of peaks and troughs, well located property always goes up in value,” she says. “Historically, the way governments’ handle the housing supply and demand during crises determines the property markets’ ability to rebound. London and Lisbon, although hit by the global situation, are expected to see good growth next year.”
Bathurst says, “According to Knight Frank political certainty in the UK brought about by the general election last year boosted London’s housing market confidence during January and February. Thanks to this the UK housing market and investor confidence for outlook 2020 was the best it had been in years. These factors will help the city see a revival in growth as soon as 2021, she says. “Knight Frank attributes Lisbon’s success to their government’s handling of the pandemic coupled with a strengthening demand and limited supply,” she says.
Despite the gloomy outlook for house prices this year, most analysts and experts in the property market believe that London’s housing market will make a strong recovery by 2021, says Bathurst.
These include CBRE, an American commercial real estate services and investment firm, predicting a pent-up demand will cause a lot of activity in the housing market post-corona. Estate Agencies Chesterton’ and Savills believe London will lead the recovery in 2021. Chesterton’s, one of the oldest firms in the world, expects a 3 – 4% growth in central London while Savills, expects a mid-term growth of 15% over the next five years in central London. A more cautious Dr Howard Archer, of EY’s Item Club, thinks UK house prices will see a 2 to 3% recovery in 2021. Nationwide’s chief economist, Robert Gardner, also sees UK house prices rebounding after the crisis thanks to the good economic measures put in place by the government during the pandemic to help businesses, buyers and homeowners.
Bathurst says, “The fundamentals of property investment still apply. There is still an undersupply of housing in the UK and the government remains committed to addressing that. With the low new-build rates coming through in 2020, low inventory and low interest rates, it is less likely that we will see price falls.
“In March, the ‘Boris bounce’ that buoyed the markets after the Boris Johnson became Prime Minister, was strong and this is likely to bode slightly better for a post-virus bounce-back,” she says. “The strong growth seen at the start of the year and annually has provided a solid foundation the market can bounce back on. The top end of the market and prime locations always fare best in crisis,” she says.
“Portugal’s main attraction for South Africans is their excellent golden visa scheme,” says Bathurst. “At the beginning of the year, the Portuguese government announced proposals to exclude Lisbon and Porto from this programme but, in light of COVID-19, these plans have been put on hold for the year. This creates an opportunity to benefit from a fantastic property investment and get your European residency,” she says.
“Last year, PWC Emerging Trends in Real Estate Europe 2019 study ranked Lisbon as the top real estate market in Europe. To make it even more attractive, leveraging is also available at 75% of purchase price, at rates from just 1%,” she says.
“Lisbon has solid fundamentals which drives property growth. It has revived a wonderful quality of life that adds to its growing attractiveness as an international destination for companies, investors and tourists,” she says.
“Portugal is also enjoying an economic revival with over 23 000 foreign nationals choosing to settle in the country to benefit from its preferential tax treatment,” she says. “As such, some 70 000 new homes need to be built in Portugal every year to meet demand, over half of these are in Lisbon and Porto.
“Metropolitan Lisbon offers investors and residents convenient links to the rest of Europe. At least 57 airlines fly to 132 destinations from Lisbon airport, which is also currently undergoing a €1.15 billion expansion. The influx of business and leisure travellers in Lisbon continues to increase. The number of passengers moving through the city’s airport reached a record high of 29 million last year,” she says.
Bathurst’s tips for investing in these prime cities:
- Don’t wait for the market to go down – they probably won’t. Rather try to negotiate a discount
- If you’re using independent property experts to help you, consider buying a site unseen as waiting to travel may mean missing a good deal
- Buy premium property in prime locations
- If you’re an experienced investor, consider this a time for making bulk purchase and negotiating discounts
- If buying off-plan, only go with developers who have proven track record and have experienced downtimes in the past
- Take advantage of low interest rates and leverage where you can
- Use independent property advisors who are not tied to one developer