Property Insider editorial by Mark Hempshell
The words ‘bargain’ and ‘property’ aren’t words that are used together very often, especially over the last few years.
Property prices pretty much everywhere in the country went up and up (and up) in the late 90s and early-mid 2000s. The financial crisis in 2008 led to what was, in real terms, a very small correction and property prices have been rising to record levels ever since.
As a result it’s been hard for buyers, including property investors, to enter the market and expand their portfolios.
But now – for investors who don’t follow the herd – it could be the first time for many years to bag a property bargain.
That’s maybe a bold claim to make. Especially in a market where, according to the Land Registry and many other sources, prices are still rising in many areas on an annual basis.
Let’s look at a few facts for a moment:
Interest in the prime central London market – headed up mainly by wealthy foreign buyers –and prices there, are falling. Increased Stamp Duty on high end property is one of the reasons.
Yes, maybe few ‘ordinary’ UK investors are actually looking to buy in the prime London market. But history tends to prove that price movements in the prime London market tend to drip down to the wider London market, which then tend to ripple out to the regions.
Brexit seems to have dented confidence in the market, although it’s still too early to be sure what the longer term effects might be. Most experts agree that uncertainty over Brexit will most likely affect sentiment in the property market more than the end result itself.
Interest rate changes are on hold. But chances are there WILL be a movement very soon. So some buyers could be sitting tight and waiting for this to happen.
And that’s even before you consider the wider economy. Current projections aren’t painting a very rosy picture. Most world economies are starting to struggle again.
Apart from the big global picture other lower level, more tangible things are likely to exert some resistance on property price rises too.
Increased Stamp Duty Land Tax for investors has received a lot of attention in the headlines, even though in the scheme of things it’s a pretty trivial sum. Could the latest government cut it?
Restricted tax allowances for landlords are a more serious consideration. However, some comparisons might be drawn between this and the withdrawal of mortgage interest relief in 2000. After a small blip the market hardly noticed, and went on to rise to record levels.
The general opinion from RICS surveyors in their latest Residential Market Survey is that the market is starting to cool and prices could fall (although their long term view is still broadly positive).
At auctions, very much the barometer of the property market, a number of auctioneers are already reporting a more cautious market – although that comes on top of record sales by both property numbers and amounts raised over the last couple of years.
And one final point to consider – which is frequently overlooked but which shouldn’t be underestimated – it’s summer holiday time! The property market perennially slows down over the summer in any case.
In many ways, the current situation all adds up to the ‘perfect storm’ for buyers looking to bag a property bargain. There’s a very good chance price rises will cool, and they might even fall marginally in some places. At the very least offers are much more likely to be seriously considered, and accepted.
But this is important. Most expert projections for property price rises over the next few years are very firmly up. While these are, of course, only projections and far lower in many cases than rises over the last couple of decades they’re modest and perfectly possible.
Of course, buying at the moment calls for a steady nerve. Buyers need to consider lettability and yields more than ever before. They need to factor the extra Stamp Duty and reduced tax allowances into their plans.
Assuming you can do that, however, if you want to buy a property – or buy more property – there really is a very good argument to be made for why now is the best time for several years to buy property …. and why you should buy it now.
Mark Hempshell is Editor in Chief at Property Insider