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How COVID pandemic is impacting property prices in UK and overseas housing market

·3-min read
Hong Kong has maintained a steady purchase and rental market. Photo: Getty Images
Hong Kong has maintained a steady purchase and rental market. Photo: Getty Images

House prices have become more affordable for the average family in countries including China, Germany, Hong Kong, Singapore and the UK in the last year.

Research by health insurance provider Aetna International found that the UK’s rental and housing markets maintained stable increases into the early part of 2020, but these reversed in mid-2020, bucking predicted gains, when the pandemic’s first wave peaked.

“While the overall changes are slight, renting has become less attractive and buying property more affordable,” the report noted.

However, it said it remains to be seen how the government’s freeze on stamp duty in mid-2020 will impact the housing market when it ends in March 2021.

In Germany, both the rental and purchase markets are lower than forecast. Price-to-income and mortgage as a percentage of income both saw a decrease of 0.7%, while price-to-rent ratios dropped inside and outside major cities by 0.9% and 2.9% respectively.

As such buying property is currently more favourable than renting, which the report flagged as a potential issue for expats considering a short-term move.

READ MORE: UK housing boom slows down as lockdown 'chill' hits market

“The nation’s proactive response to the first wave of COVID-19 may well be a reason for the relatively low impact on Germany’s housing markets, which was not impacted as badly as similar countries, such as the UK,” it added.

The report reveals that, relatively speaking, house prices in China are falling. These low prices may explain the news reports from 2020 that suggest sales are booming in China. This may be due to buyers taking advantage of affordable mortgages.

Meanwhile, Hong Kong has maintained a steady purchase and rental market. However, in 2020, the rate of growth in the rental market slowed and both price-to-income ratio and mortgage as a percentage of income bucked predicted trends, with price-to-income ratios dropping by 11.9% from mid-2019 to mid-2020.

As a result, the affordability of buying a property has increased for many families on an average income.

On the opposite end of the spectrum, the Philippines saw the biggest increase in price-to-income ratio, from 23.63 to 29.92. This means that house prices are almost 30 times the average family income

France and Indonesia have also seen housing prices increase relative to average income.

In Indonesia, since mid-2019, mortgage as a percentage of income rose by 58.9% and price-to-income ratio increased by 41.3%, making housing far less affordable for the average family during the course of the pandemic.

Indonesia experienced a steady growth in COVID-19 infections in 2020. Coupled with an economy in recession, the affordability of housing may continue to feel the impact of these combined circumstances, the report said.

READ MORE: Pressure grows on UK chancellor for stamp duty holiday extension in budget

Over in the US, the price-to-rent ratio (ratio of home prices to annualized rent) in city centre areas of the US has seen a very noticeable increase for mid-2020, resulting in this figure being up over 16% year-on-year. This indicates the market tipping in favour of rental over purchase.

“While COVID-19 has clearly had a dramatic impact on the global housing market, it will be difficult to fully assess the resulting change until economies stabilise,” noted Caroline Pain, senior vice president, customer proposition, Aetna International.

“Expats looking to move abroad should consider the measures put in place to support the housing market by the government in their destination country.

She said that above all, expats should prioritise the health and well-being of their family as relocating to a new country is a “big life change even when there isn't a global pandemic.”

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