HELLO PROPERTY LOVERS!
This week, Nationwide reported that in May house prices fell by -1.7%, that's the largest fall since February 2009 during the Financial Crisis, but what does this actually mean?
Well, it doesn't mean much just yet. Here's why...
Long term prices will be severely hit if either of two things happen: (A) a long term reduction in demand driven by a large increase in unemployment and/or (B) a reduction in mortgage availability and credit drying up. Yes, (it's sad to say) there are slightly more unemployed people now compared to before the pandemic, but the majority are being furloughed, hoping to return to work soon. And credit hasn't dried up, in fact we have spoken to a number of mortgage brokers in the past week and the marjory of lenders are still lending and their products are similar to pre Covid levels.
As we know, employment and the economy in general have a protective blanket draped around them. The government is pumping dosh into the system like never before. So the -1.7% drop in house prices is merely a shock cause by the housing market being 'frozen' at the start of lockdown (no viewings, no moves) - the Nationwide reported that there was a 53% drop in transactions in April vs last year.
2 weeks ago, the housing market was reopened after 8 weeks of its induced coma. And there have been reports of pent up demand (and some families wanting to kill each other!) leading to a surge in transactions, with one newspaper reporting it was like 'the cork coming out of a champagne bottle'. This may stabilise prices in June, depending on whether vendors hold their nerve in negotiations, or accept big haircuts due to the uncertainty. Time will tell.
However, we will only start to see the real impact of the pandemic when government support is taken away in Q4. Until then, the deep freeze has certainly thawed, but it is certainly not as hot as it was in January. And we predict this luke warm to continue with a lot of buyers sitting on their hands. Robert Gardner, Nationwide's Chief Economist said: "Behavioural changes and social distancing are likely to impact the flow of housing transactions for some time. Our recent market research survey suggested that c12% of the population had put off moving as a result of the lockdown. Most viewed the current situation as a temporary pause in the market, with would-be buyers now planning to wait six months on average before looking to enter the market". Six months! Well, you can't blame people for being nervous and this points to a tumultuous summer for the housing market.
The other thing we thought was interesting was a survey carried out to to understand how peoples preferences have changed when buying a house...
If this is a long term trend, we could see more people wanting to live in the suburbs with gardens and more space vs city centre flats. Just something to consider when you're investing.
Well, that's it for this time. As you know, we are buyer's agents, specialising in sourcing high yielding property investments in the North West of England. If you are looking to invest or even just thinking about it, we can help! Feel free to get in touch for a friendly chat.
Happy investing!
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About Pat from Total Property Group
Hi, it’s Pat Harper - Director of TPG. I believe that investing in property is one of the highest returning and safest ways to invest your hard-earned money. I also believe that even the busiest of people should be able to enjoy the benefits of property investing. These are the reasons my hands-free property investing service was born… and this is how it works:
I find properties that meet your criteria, I case manage the property through legal, I project manage any refurbishments and I oversee the lettings process. Everything is taken care of to ensure your investment is as passive as possible.
If you are looking to purchase an investment property contact me now to arrange a FREE investment discovery call. Click here to initiate your property investment journey.
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