Housing Market Update – November


In this blog I want to give you a Housing Market Update 2020. This is for the UK property markets. I've been investing in property in the UK for 25 years, So why am I writing this blog? Well, the property market is changing and it's really important that you are kept up to date if you want to understand the best opportunities for you in the UK property market.

The Property Year So Far

So we've had a crazy 2020 as you would agree at the beginning, I was thinking that we were going to have a bit of a market crash because there are so many landlords coming to our network meetings saying they want to sell up their portfolio because of Section 24. Those are the tax changes that came into place in April, 2017. We started to see the real effects of them in January, 2019 and then obviously this year, January, 2020 and it's going to come and even more in January, 2021. So I think that's going to continue, landlords looking to sell up.

Then this pandemic happens and everything freezes up. I had one purchase and three remortgages going through at the time and everything stopped for a couple of months. Now, normally in the springtime, there's a boom in the UK property market and in the summer. The spring one couldn't happen when the market opened up again, all the estate agents, solicitors, surveyors were all really busy because of all the pent-up demand that stopped literally for three months. Then you've got the people who would normally get interested in the springtime, they suddenly came to life and then the summer boom was slightly delayed as well. So what this meant was actually there was a whole load of activity that was kind of piled up and then suddenly it all went through and it gave the sense of a real boom in the market.

“Boris did his famous build, build, build speech, which is all about that’s how the UK government wants to help the economy get on the ground by pumping loads of money into development and building projects.”

Government Incentives

Then a couple of other things happened. So obviously the government has lots and lots of initiatives to help people who are struggling financially. They launched the bounce back loans and the simple loans as well. So there's quite a lot of money floating around, a lot of people are using that money to buy property. So a little bit of a boom, lots of money available.

Then we have the government who realised that the market's going to crash as a result of this pandemic and the recession. The Bank of England had predicted that due to COVID-19 this year, they thought that property prices are going to drop 16% at some point either 2020 or into 2021. But it hasn't happened yet and that's why the government stepped in and introduced, first of all, the Stamp Duty Holiday.

Now as investors, we still pay the extra 3% surcharge but people who are First Time Buyers or other people buying property don't have to pay that. That has definitely stimulated the market and then recently they also announced bringing out the 95% mortgages to help First Time Buyers. These are incentives to try to keep the property market going, why? Because the property market is really essential in the UK economy. This is why during the lockdown, the government said, it's okay for large building sites still to be open. When we came out of the lockdown, the government said why we need to sort out this recession. Boris did his famous build, build, build speech, which is all about that's how the UK government wants to help the economy get on the ground by pumping loads of money into development and building projects.

 

Limited Supply of Accommodation

Ultimately we still do not have enough accommodation in the UK. This is why for many, many years, the UK has been a very popular place to invest. We live on a small island, a popular island with an increasing population and a limited amount of accommodation. This means over the long term property prices and also rents go up. So this is why so many people like investing here. However, we know that the property prices don't always go up, the property market just like any other market is cyclical, it comes up and it also comes down.

We saw the last crash in 2009 and at that time it became very difficult to borrow money. It was all because of the global credit crunch, sellers were desperate to get rid of property. People bought property that was too expensive in 2007-2008, property that didn't really stack up and that didn't give positive cash flow. So we had investors who had property that they were subsidising, coming down in value. Sometimes the mortgages were higher than the value and a lot of them just threw the keys in.

    Targeted Commercial Property & Businesses

    Now this time it's going to be slightly different. Whenever you have a boom, you always have a bust afterwards and I think because of the recession, we're going to see that commercial property is massively hit. Commercial property has always been viewed as really safe investments but we've seen big companies, turnaround and say, no, we're not going to pay you in March because they just weren't trading. There's not much those landlords can really do about it because everyone is in the same boat.

    So Commercial landlords who've had it really easy for many years, typically earn a very passive income because usually the tenant takes care of the building, maintenance and the insurance, suddenly for the first time ever, they've not got their rents.

    Many businesses are also tragically going out of business. So we're seeing lots of shops and restaurants or bars just closing down. What COVID 19 and this pandemic has done, is spee up what was probably going to happen over 10 years and made it all happen in 2020. That's why this housing market update November, 2020 is so important because we are on the cusp. In October, we saw an end to the furlough scheme, the government are talking about extending it. But what this means is many people who were expecting to go back to work, have just been told, sorry, we're not going to take you back. Look at the bar and nightclub industry. You have to shop by a certain time. There's curfews coming in, this means that the business has just been killed for some of those industries.

    “…they might be open to things such as Purchase lease options, Exchanges with Delayed completion and Vendor Finance. Strategies most of which actually come from the Commercial Sector but are going to be very valid in the residential”

    What Does A Recession Mean for Property?

    So we're going to see this recession unfortunately getting worse. Property prices go up and up and up. A lot of people are saying, now is a really good time to sell because we've got all these people wanting to buy. There's going to come a tipping point, a point where prices are just too high and where people think actually, the economy is not good, this is not a good situation, people are going to stop buying.

    If the market comes down, banks are probably not going to want to lend as much. That means there are going to be lots of sellers who are more open to creative financing strategies. If there are just not buyers around, they want to get rid of a property, they might be open to things such as Purchase lease options, Exchanges with Delayed completion and Vendor Finance. Strategies most of which actually come from the Commercial Sector but are going to be very valid in the residential.

     

    Once in a Lifetime Opportunity

    So we're going to see this recession unfortunately getting worse. Property prices go up and up and up. A lot of people are saying, now is a really good time to sell because we've got all these people wanting to buy. There's going to come a tipping point, a point where prices are just too high and where people think actually, the economy is not good, this is not a good situation, people are going to stop buying.

    If the market comes down, banks are probably not going to want to lend as much. That means there are going to be lots of sellers who are more open to creative financing strategies. If there are just not buyers around, they want to get rid of a property, they might be open to things such as Purchase lease options, Exchanges with Delayed completion and Vendor Finance. Strategies most of which actually come from the Commercial Sector but are going to be very valid in the residential.



    I believe, although these strategies only work in certain circumstances because there are five creative strategies, usually at least one of them will work on any property deal as long as it's a good property deal.

    What do I mean by a good property deal? Well, it's good to have enough profit, it's good to have enough cash flow so that it gives you an income but also there's enough to pay whoever or wherever you've got the board money from. That means there's no limit to the number of deals and the size of deals you use if you're using creative finance strategies. So I wanted to give a little bit of an update and there's this little boom has lasted longer than everyone expected but I don't think it's going to last very long and you just need to get ready to make sure you can make the most of the UK property market crash 2021, that's what's going to happen. So that's pretty much it for the housing market update November, 2020. I do hope this has been useful for you.

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