Housing demand remained strong in the first quarter of the year in stark contrast to commercial property, which has been dealt a body blow in many sectors, the Bank of England has reported.
Its quarterly review of the economy reveals that investors’ appetite for commercial property was still below its pre-pandemic level, in particular for retail premises, while the residential market remains largely in rude health.
Estate agents reported a significant over-supply in sales and lettings, with falling values and rents. Rental arrears were still an issue, particularly in commercial property where some loan covenants had been breached.
The BoE found some estate agents had seen interest from overseas investors for property in prime locations, but overall its summary of business conditions shows the outlook for the housing market had improved, with activity supported by the extension of the Stamp Duty holiday and Coronavirus Job Retention Scheme.
But the agents quizzed also expressed concern about a shortage of properties for sale and said buyers appeared to be less price-sensitive than normal.
Demand for rental property remained strong in most parts of the UK, causing rents to increase. Rent arrears were reported to have risen only slightly, although there was uncertainty whether that would continue to be the case once the temporary increase in Universal Credit ends later this year.
The Bank of England said that while overall economic activity remained weak, this was expected to pick up soon. It pointed to tentative signs of business confidence improving and indications that employment opportunities would grow.