Tuesday, 23rd June 2020
Resilience in the face of adversity

In the adverse economic conditions of the COVID-19 pandemic, the living sector is proving one of the more resilient parts of real estate. This was the overall conclusion of the last of four webinars on the impact of the coronavirus on UK property held by the SPR.

In his opening presentation, Lawrence Bowles of Savills recalled his organisation’s earlier research entitled the Sky’s the Limit, which reflected the strong long term growth potential of the sector, many parts of which are still in their infancy for institutional investment.  Given the current economic outlook, 2020 is clearly likely to be a difficult year across the student accommodation, build-to-rent (BTR) and senior living market segments, but Bowles highlighted that rental growth prospects look less severe than for most of the commercial market, even if transactions in the wider residential sector have fallen away during the pandemic.

In response to a question from SPR Fellow Yolande Barnes, the webinar saw a lot of discussion on senior living and care homes in particular.  From a purely real estate perspective, Bowles noted that this was the least mature of the three segments he had looked at, with a great deal of old stock that needed bringing up to date.  Speaking as a panellist, Emma Grew of M&G Real Estate agreed, suggesting that this would have to take place in the context of the wider social and political debate on how the care sector is structured. Michael Adefuye of Legal & General Investment Management proposed that this could be part of an even broader discussion on UK housing policy, with issues like habitation density – a factor highlighted by the pandemic – coming to the fore.


Lucy Greenwood of Savills, who moderated the webinar, polled the audience on which particular design features they would now consider most important when choosing their own next home.  Having a garden proved to be the biggest must-have, closely followed by home-working space – two features that have been at a premium during the pandemic.  Another poll looked at which residential locations were now most desirable among the audience, with ‘commuter belt’ locations gaining some favour relative to city centres.  But Grew cautioned against seeing all such preferences as a sign of permanent changes, and people may not be willing to pay more to obtain these qualities in the longer-term.  Adefuye concurred, noting that the attractions of city living were likely to reassert themselves once cultural and entertainment amenities opened again.

The panel also considered whether the pandemic could change the mix of tenures in the living sector. Bowles proposed that the current unavailability of 95% mortgages could mean younger people are more likely to rent rather than buy their homes. Adefuye saw this as part of the broader tendency for renting to increase in periods of economic downturn and greater job uncertainty.  Meanwhile the care sector could well see an upheaval of the current rental model where those with private sources of income essentially subsidise those funded by local authorities, an arrangement that Bowles viewed as unsustainable.  But Grew countered that the scope for such a revolution could in practice be limited, as public finances will be under huge pressure once we return to something like normality.

Tim Horsey