Omicron Covid-19 Variant – Will it Affect the Property Market?

What is Omicron? 

Omicron, otherwise known as B.1.1.529, is a new strain of the Covid-19 virus that has been classified as a “variant of concern” by the World Health Organisation.

How Many Cases of Omicron Are There in the UK?

At the time of writing, there have been 22 confirmed cases of Omicron in the UK, according to a report in the Guardian.  

What Happened Last Time? 

To help illustrate the potential impact of Omicron on the UK property market, we’re going to look back at house prices and reports that appeared during each of the three reported waves of the Covid-19 pandemic. 

How Have We Defined a Covid Wave? 

Before we get into the data, it’s important to address how we are defining a Covid-19 wave. 

There is currently no official definition of what a Covid-19 “wave” is, and the data used may change depending on how you define it. 

At RWinvest, we are using the wave definition provided by The I, which defines a wave starting when reported cases rise over a seven-day period starting from below 2,000 national cases. 

With these parameters, we get three Covid waves, beginning in March 2020 and running until the present day, which is December 2021 at the time of writing. 

First Wave – March 2020 to May 2020 

The first wave of Covid-19, which we’ve defined as running from March 2020 to May 2020, led to the closure of the UK housing market.  

With Covid cases rising and the UK’s first national lockdown implemented on March 26th, the UK housing market was essentially forced to close overnight.  

It wasn’t until May 13th that the market reopened.  

Despite this long closure period, the impact on house prices wasn’t considerable, with prices between March and April dropping by just -1.02%, before increasing in May by 0.52%.  

For context, during the same period, the stock market experienced its worst crash since 1987.  

This means that despite the Covid-19 pandemic causing housing transactions to plummet, house prices only dropped by £1,176 on average in the UK. 

Second Wave – July 2020 to April 2021

As the country exited the UK’s first lockdown, there was a newfound appetite to move homes. 

With people trapped inside their homes for months, many started to re-evaluate what they wanted from their ideal home and decided to move out. 

This was compounded by the Stamp Duty Tax Holiday, implemented in July 2020, which allowed homebuyers to save up to £15,000 on taxes when buying a new home. 

These factors were mirrored in the housing market, which saw a huge rise in property prices over the year. 

In fact, despite two national lockdowns occurring in this period (November 5th – December 2nd 2020, and January 6th to July 19th 2021) prices continued to rise to a peak of £253,508 in March – the first-time UK prices surpassed £250k on average. 

While there was a slight dip in April 2021 of -1.10%, the data shows that the UK housing market performed well during the pandemic and remained resilient. 

Third Wave – June 2021 to Present Day (December 2021)

As most Covid-19 restrictions came to an end and the country returned to some form of normality, UK house prices experienced an unprecedented surge during the third wave of Covid. 

With tax savings still available from an extended stamp duty holiday, and phase 4 of the Covid-19 roadmap beginning on July 19th, housing market activity exploded. 

As of July 2021, Rightmove noted a huge supply and demand imbalance, with the busiest ever first half of a year with 140,000 more sales agreed and 85,000 fewer listings than the long-term average. 

This persisted throughout 2021, with September 2021 seeing the hottest ever competition to buy property, with buyer demand twice as high as pre-pandemic levels.  

In fact, Rightmove found that the price of new property coming to the market reached an all-time high of £338,462. This was at the same time as the Guardian reported that UK house prices were rising at the highest level since 2004.  

While property prices dropped in July after the main Stamp Duty Holiday ended, they soon recovered, reaching an all-time peak of £269,945 according to Land Registry data. 

This again shows the resilience of the housing market, with property constantly in demand by both homebuyers and investors. 

How Was the Student Property Investment Market Impacted by Covid-19? 

Despite many students opting to move back home during Covid-19, the student property investment market experienced a record-breaking year. 

A report from Savills found that £5.77 billion was spent on purpose-built student accommodation in 2020 – the highest-ever amount. This came alongside an 8.4% rise in UCAS applications for 2021. 

Savills states this is a sign that investors have remained confident in UK PBSA, with rent collection and occupancy rates in student accommodation resilient compared with other housing sectors. 

You can learn more about student property investment by reading our 2022 guide. 

What About the Rental Market? 

The initial impact on private landlords and the rental market during the Covid-19 pandemic wasn’t as optimistic as the impact on UK house prices. 

A report from the National Residential Landlords Association released in March 2021 found that 7% of tenants – around 840,000 – had built up arrears during Covid-19.  

Around 18% of these arrears were over £1,000 and around 11% of renters are now unemployed because of Covid-19. 

This naturally had an impact on landlords, with 60% of NRLA members losing income as a result of the pandemic, with 14% of landlords losing 20% of their income. 

We’re now in December 2021, however, and the rental market has recovered well. 

In April 2021, it took just 8.9 days to rent a property, down from 31.9 days in April 2019. 

Rental demand is so high, in fact, that Manchester has fewer than 500 available rental properties for the first-time ever. 

This has led to a surge in rental prices, with the UK average rent reaching an all-time high of £1,061 in September 2021, according to HomeLet. 

The Full Picture: March 2020 to Present Day

• Since March 2020, house prices have increased by £37,261, or 16.01%, up to a current average of £269,945. 
• It currently takes just 36 days to secure a homebuyer in the UK, according to Rightmove, which is the joint-lowest time in the last 12 months. 
• Despite three national lockdowns in the UK, property prices have continued to hike, with predictions from Savills suggesting up to a 4.5% rise in house prices in 2022. 
• Rent reached an all-time high of £1,061 PCM in September 2021, according to HomeLet. 

Should Investors Be Concerned in 2022? 

Looking at all the data, should investors be concerned about investing in property in 2022 with the rise of Omicron? 

While we don’t have a crystal ball to predict the future, the past data suggests that the UK housing market has learned to deal with Covid-19 and its lockdowns. 

This means that if Omicron did lead to further restrictions, including any future lockdowns, house prices and transactions should remain stable.