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 the Author
Pat Harper
Pat Harper is a respected buy-to-let property investment writer and market analyst based in Liverpool. As founder of Total Property Group and a regular industry commentator, he brings real-world expertise and data-driven insights to property investors.
Disclaimer
This article is for informational purposes only and does not constitute professional advice. The content is based on our opinions and experiences, but we make no representations or warranties regarding its accuracy or completeness. Readers should not act upon this information without seeking advice from qualified professionals. Investments carry risks, and past performance does not guarantee future results. The author and publisher are not liable for any losses or damages resulting from the use of this information. Always conduct your own research before making any decisions.
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