House prices are rising: My honest appraisal of where the housing market is today, where it is going and what it means for investors.


2 October 2020

Savills have today projected house prices will be 4% higher at the end of this year than they were at the same time in 2019.  This alongside the news from Nationwide that there were nearly 85,000 mortgage approvals in August this year well above the monthly average of 66,000 prevailing in 2019. The housing market is proving to be particularly robust. It’s a similar story elsewhere in the developed world. In August Germany recorded house prices 11% higher than the year before.

This rise in the market in the U.K. has been caused by four main catalysts:

1.    The stamp duty holiday

2.    A bottle neck of transactions as a result of lockdown.

3.    Ultra-low interest rates

4.    The changing requirements of homeowners and tenants.

Will it last?

Source Property InvestmentsThere will undoubtedly be a correction in 2021 as the furlough scheme and stamp duty holiday comes to an end and unemployment rates are expected to be at their highest. More properties are likely to come onto the market and prices will fall.

Source Property Investments

 

Savilles projects there will be no further growth in property prices in 2021.  The Centre for Economics and Business Research is less optimistic and is predicting a fall in average house prices next year, citing that the market is being artificially buoyed by the stamp duty holiday.

What does this mean for investors?

More than ever it is a reminder to invest for the long term: rises and falls in the market are to be expected and prepared for. Over time these fluctuations are ironed out and more often than not provide a good return.

Savills projects the UK market will rise 20% in the next four years. Property is not a ‘get rich quick’ scheme – treat it like one at your peril. It is, however, a fantastic means to build wealth over time.

Should you invest now?

In short, the current circumstances favour those who are already homeowners. if you are fortunate enough to be in this position, this may be the time to begin or build on your existing property portfolio.

With low interest rates and mortgage lenders looking favourably on those who can make significant deposits, capital could be available for your investment.

The stamp duty holiday also provides a nice upfront saving for investors that won’t be available when the scheme comes to an end in March next year.

Furthermore, low interest rates means that money deposited in the bank is actually losing value when inflation is taken into account. For many of our clients, investment is a smart play.

Make the right investment

Given the current climate, it is more important than ever that you find the right investment. Covid has changed the goal posts dramatically: tenants are seeking more space, both inside and out. They are looking for a place to work from home and moving closer to the suburbs.

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As travel restrictions remain in place, we are all looking to holiday in the U.K. instead of abroad. The staycation market is one that has been particularly attractive to our clients at this time.

There are so many things to take into account when considering any sort of investment. It should never be taken lightly or without thorough due diligence. Even more so now!

If you are interested in investing in property and would like our help to find the right one for you and your personal circumstances, don’t hesitate to get in contact.