COMMENT The year 2020 will not be missed. It was, as a five-year-old recently told me, “a bit pants”. How true.
It was a year in which we realised how vulnerable we all are – though also one in which we learnt what really matters to us. A year of setbacks and tragedy, but also of resilience and renewed neighbourliness.
So, what awaits us in 2021? As I write this, it’s not known if new strains of Covid-19 will affect the efficacy of vaccines. Despite this, I feel confident in saying that 2021 will be year of two distinct halves. The first few months will feel as if little has changed. However, if we look beyond Easter, I believe there are good reasons to be cheerful.
Follow the science
First, we should reflect on the fact that the vaccines have been developed so quickly. What once took a decade has taken less than 12 months. This is hugely encouraging, both in tackling the current crisis and for dealing with future pandemics. More parochially, much of this work has involved UK scientists, laboratories and universities. This is a huge opportunity for us as a country and as an economy. It will need sustained investment – in skills and in facilities – but the UK is well placed.
Secondly, the potential for the economy to bounce back is considerable. As the Bank of England’s chief economist has noted, our savings ratio soared in 2020 to more than twice the previous highest level. This equates to £100bn. There is a similar story in the corporate world, with key decisions delayed throughout 2020. If social distancing starts to unwind from spring, many of those investments will be revisited.
Clearly the outcome of Brexit will affect this. The deal struck on Christmas Eve provides broad regulatory certainty for those trading with the EU, especially in manufacturing sectors. It doesn’t cover the larger service sectors, but then there isn’t really a single market in services in the EU. So while there are now going to be ongoing talks in specific sectors – such as financial services – there is at least a trading framework and the opportunity to begin a new, mutually respectful relationship with our European neighbours.
The new watchword
The real estate markets will be shaped by these broader trends. Growing confidence and consumer spending will also help the coffers of commercial landlords and investors, while encouraging commercial developments to proceed. It won’t be quick or uniform across the country, but there is a real appetite to renew our city and town centres. It suggests that the second half of the year and 2022 will be a period of strong property activity.
Much has been written about how home working will impact on workplaces. ‘Agile working’ is becoming the concept which is shaping employers’ plans. However, it’s a concept we’re going to need right across the real estate sector: agility in design; in planning; in building; in taxation and other policy measures. We are all going to need to learn to be agile in how we think, what we do and how we work.
The residential markets show more mixed signals. The cut last year in stamp duty boosted transactions and prices in many parts of the country. In 2021 we are due to see the end of the SDLT tax holiday and the tightening of the Help to Buy scheme. These will impact demand, which is why I suspect the chancellor may want to think again about the impact of SDLT. Other tenures, however, look interesting – with major investments and activity planned for both build to rent and for the later living markets.
So, while these first few weeks may look gloomy, if we can raise our sights to look ahead, I believe there are good grounds for optimism. Happy new year!
Mark Prisk is a former housing and construction minister and MP
