The impact of Covid-19 has been unprecedented not just in the UK but throughout the world. Even the biggest companies and best prepared amongst us have been impacted, no one could avoid this pandemic.
Vantage predicted back in 2015 that in 2021 we would enter a recession period and our business had been planning for this. Our prediction was supported by the fact the World Monetary Fund said in late 2019 that the world’s economy was in its worst shape since 2009. Oxford Economics also noted that Q4 GDP was relatively weak meaning the economy lacked momentum even before the Covid-19 pandemic.
Covid-19 has been the final nail and the UK GDP is now amid a deep contraction, but many suggest the rebound should be sizeable. Savills noted that a likely surge in the household saving ratio over the coming months should help create the foundations for the recovery. We, however, believe like them that a potential rebound could be mitigated by higher unemployment once the current pandemic subsides.
We are yet to observe any signs of distressed selling in the markets, with this expected during the second half of the year if it does when the bidding process will resume its usual competitiveness. Acquisitions may well be by US back companies as the Euro has fallen heavily against the dollar prompting European property to look attractive.
Those who enter the market at the right time and early will make the fastest and greatest returns with experienced asset management. Nigel Hugill co-founder of Urban and Centric agreed with this point saying “we have been through cycles enough times to know that property follows economic cycles. One of the history lessons in provincial development is you want to start early in the recovery cycle”.
Vantages revised business modelling raises four key points which are at present largely unpredictable and will cause the real estate market to be in a stalled position until they show a clearer pattern.
Lord Byron said, “adversity is the first path to truth”. Those who acknowledge the Covid-19 this situation, avoid the talk by those who wish to see the world stay as it once was and act sufficiently will make the best of a bad situation.
1. Covid-19 virus management
2. Government intervention
3. Corporate action
4. Individual actions
Our business planning approach at Vantage has been to expect the worst-case and work back, if things improve better than expected we are in stronger than hoped. We encourage everyone to prepare realistically and work together to see the coming period out as best possible. People will lose savings, jobs, homes and potentially loved ones, it is a sad time. But those who pull together and are realistic will survive.