In this blog, I'm going to give you UK Property News, 2021. A February Housing Market Update. I'm going to share with you my Housing Market 2021 forecast because I'm often asked when the housing crash 2021 will happen, or even will the property market crash? I've seen a number of booms and crashes over my 25 years of investing. But what I want to do in this blog, is share with you my thoughts on what's happening in the UK property market right now. More importantly, what is the impact on you and specifically, what can you actually do about it?
Is There Still Going to Be a Property Market Crash?
So, first of all, a lot of people will ask, you know, is there going to be a property market crash? Over the last 10 years, we've had a really good growth in the UK property market. Last year in 2020, we had amazing growth. We had a boom, strangely enough, because of the COVID-19 pandemic. Now how on Earth could a pandemic cause a property boom? You would expect the market to probably crash. And I think we haven't seen the worst of the effect of the pandemic yet, so I believe this year, 2021, we will see a property market crash. I'll explain why in this blog.
But first we need to look back a little bit. So the last six months we've had an incredible boom in the property market, why is that? Well, in March, 2020, we had lockdown number one. The whole property market shut, for about 10 weeks and you couldn't do anything. All the solicitors were shut. All the lenders were shut because everyone was applying for mortgage holidays. They were nervous about the market, as this had never happened in living memory. This was alongside surveyors and estate agents, everything ground to a halt. So there was nothing that could be done.
Normally at that time of the year, there is a property boom in the spring. That couldn't happen. So, when finally the property market opened up, I think there was a great relief that we were out of lockdown, that was a bit of a feel-good factor. Secondly, there was all this pent-up demand that hadn't come through and the normal boom that also hadn't happened. But one of the really big things that fueled the property market in 2020 was the fact that the government was handing out all this money, Bounce-Back loans, CBIL loans etc. That money was not really supposed to be used for property investing. It was supposed to prop up and support businesses, but I think a lot of investors did use that money. So as a whole, there was a lot of market money sloshing around in the property market. Add to that the fact the government also introduced the Stamp Duty Holiday.
Ability to Add Value
I've talked about this in previous blogs, as we know, Stamp Duty Holiday is supposed to end on the 31st of March, 2021. This is for properties up to 500,000 pounds, they are saying no Stamp Duty for First Time Buyers. Or if you are selling a house and moving on, again no Stamp Duty. Now, as investors, we still pay a 3% stamp, but for everybody it's better than it has been previously. Now this is due to end at the end of March. And a question will be, will the government extend the stamp duty holiday?
This is going to have a real impact on what happens on the market. The reality is, where we are right now, the beginning of February 2021 - if someone was to put an offer in on a property, it’s very unlikely that it would complete before the end of March in the UK. It would take more than two months. Especially if they're getting a mortgage because mortgage companies are very slow at the moment.
I spoke to an estate agent yesterday about this and he was of the opinion that even if someone was a cash buyer, it might be difficult for them to guarantee it would complete by the end of March. So what does this mean? Well, it means that everyone who probably wants to buy a property and get it done before March has probably already made an offer and it's already progressing. They will have made offers in October, November, December, and it's those transactions that are coming through now. Right now, a lot of agents I'm speaking to, are saying actually the demand for inquiries has massively died down. So there's not as many people looking to buy properties because people have already had this rush to try and get deals in by the 31st of March. So I think that's going to definitely impact, there's not enough and not as much demand coming through.
But if this Stamp Duty Holiday is extended, that might prolong the propping up of the property market. Now we’re going to have to wait until the 2021 budget to see what the Chancellor wants to do because apparently they're going to bring in lots of different tax changes. All the money the government has been spending on the furlough schemes and the CBILS and Bounce-back loans has cost an absolute fortune. That money has to be regained from somewhere. So we expect that taxes are going to increase for property investors, we just don't know what that's going to be. Try not to worry about this, I am sure I will prepare another blog when it is announced, there’s no point worrying about things we can’t control.
“I think the second quarter of 2021 is when we’re going to see the problem. We could see property demand drop off a cliff.”
Property Demand & Property Prices
What I want to do in this blog is explain what's happening right now, what I believe is going to happen in the property market 2021, and give you my personal forecast and teach you how you can benefit from that. We've already said that Stamp Duty Holiday is going to affect what's going to happen to the market. I had predicted that we were going to see a property market crash at the end of last year. That was based on the fact that the government's Furlough scheme was supposed to end in October, 2020. Now they've extended to March, April, they might even extend it further. This has propped up the market because there were lots of people who, unfortunately, when Furlough ends, maybe they're going to lose their jobs.
Let's face it, many businesses have got rid of lots of staff, people are working from home now, they don't need offices. Lots of shops are shut, restaurants are shut, bars are shut, the whole retail and leisure industry has been hit massively. Big companies are going out of business. here are going to be more unemployment figures coming out. We have not seen the worst of this yet. But we're feeling artificially propped up and supported by this government intervention. Now, why did the government intervene to do this? Surely it's costing them a lot of money, and it is. Well, it's because back in 2020, the Bank of England predicted there was going to be a 16% drop in property prices based on the recession, the pandemic. They have whole rooms full of very clever people working these numbers out, they don't just make them up, right? That's one of the reasons the government very wisely intervened and helped prop the market up.
So we had the extension of Furlough, people not losing their jobs, we had the Stamp Duty Holiday, we also had all this money sloshing around, this is why the property market boomed. But there are a couple of things that we need to understand here. First of all, as I said, Stamp Duty Holiday at the moment is supposed to end. If it's not extended, well then that's going to cause a problem. I think the second quarter of 2021 is when we're going to see the problem. We could see property demand drop off a cliff. If demand comes down, lots of properties for sale still, then we're going to see property prices come down. That's the first factor.
The second factor that's going to have a massive impact on UK property prices this year is all this money that's been handed out, CBILs and Bounce-Back loans, people haven't had to pay any interest on that. It's this year, it's generally the second quarter of this year where people are going to start to have to pay for some of this money they'd been borrowing. Now, it's not expensive borrowing, it's very good interest rates, but still, that's money they have to pay.
Also, many businesses have been able to put off paying some of their tax, paying some of their VAT from that second quarter of 2020. That is now due and it's going to be due the first half of this year. Again, those companies might struggle to make those payments. So all of this is going to put pressure on businesses. I think we're going to see more businesses go bust. That means we're going to see more people lose their jobs.
At the end of April, we're going to see the end of the Furlough scheme, it might get extended. There might be millions of people coming on to the unemployment line. That means lots of people who are homeowners may not be able to afford to pay their mortgage. They can get benefits, they can get housing support, but it's not going to be enough to pay the mortgage. So I think towards the third quarter of the year we're going to see lots of those people say, “you know what? I can't support my mortgage, I need to sell the property, I don't want to lose it, I don't want to get repossessed.” So we're going to see all this pressure build up probably over the next six to nine months. This is why I believe by the end of 2021, we'll absolutely see property prices come down.
Now, will we have a property crash like we had in 2009? I don't think we're going to see that. In 2009, property prices came down 20, 30%. I don't think that's going to happen, but I don't know. To be honest, no one knows what's going to happen to property prices. My guess would be a 10 to 15% correction. Now, that's going to be an average correction. Some areas, prices might just plateau. Some, they're definitely going to come down, we've seen some, they are already coming down, and some might even continue to go up. It is very area specific, that's the danger when quoting averages. But that's what I feel. Now, how is this important to you? And how can you use this information? Well, whenever a property market comes down and prices are reset, it's a great time to be getting into property if you know what you're doing.
Best Strategies for Property Investing Right Now?
There are some strategies that you should be doing, some strategies you should not be doing if you feel the property market's going to fall. For example, a great strategy in a rising market is Flipping Property. This is where you buy a property, ideally at a discount, add value through renovation and sell at a higher price. You could sell it and take out the profit or you could maybe refinance and take most of the money out and hold onto it long-term to rent.
That's what I prefer to do, because I believe if you want to create long-term wealth in your family, you want to hold onto these wealth creating and wealth generating assets. So I believe holding is better than selling. However, there are some good reasons why you might sell property.
But if you think the market's going to come down, it may not be a good time to be Flipping Property. I think long-term buying holds better. Now, people might say, If the value's going to come down -if we buy here, in six or nine months later, the value might be less. This is also absolutely correct, that is a risk that could happen.
However, the Golden Rules in ‘Property Magic’, you will be able to minimise the risks. The Golden Rules are:
- 1. Buy from Motivated Sellers
- 2. Buy in an Area with Strong Rental Demand
- 3. Buy for Cash Flow
- 4. Buy for Long Term
- 5. Have a Cash Buffer
Make sure you make cash flow and hold for the long-term. If you do that, it doesn't matter if short-term, prices come down. Some will say, well, that makes sense, Simon, but why not wait? Why not wait until the property market crashes and bottoms out? The problem with that is once the property market hits the bottom, everybody believes that the market's coming up. So the press, the general public, and sellers are going to be far more optimistic that something will come along and pay more money for their property in the future. So what that means is, they're not as likely to give you discounts or negotiate flexibility.
So this is why, when the market's coming down, it really is the very best time to be securing great property deals. When you learn how to find great deals and you know what makes a good deal, you should actually find more deals than you can do yourself. A smart thing to do is keep the very best deals yourself and the deals you don't want, you could maybe sell them on to other investors. You see, sometimes people think that actually it's a lack of money that stops people moving forward. Here's the truth. If you know how to find really good property deals, there are always people out there who've got money but they don't have the time, the energy, or inclination to find great properties themselves. They'd rather work with someone like you who could find deals for them. So you could work with these people in a number of ways. You could just sell them deals for a fee, you could maybe do Joint Ventures with them, there are lots of things you can do, but it all stems from you learning how to find great property deals and that's the most important thing you could do as an investor. If you're new to investing, that's what you should do.
I often meet people who've been investing for a number of years, they might've become an accidental landlord, that's kind of what I did. I bought a home, I rented out some of the rooms, three years later, I moved on. I kept that first property. So I kind of, although it was deliberate, I didn't really go and find a specific property to rent out, it just happened. My next house, I did the same thing. So there are a lot of people who've done that, and they don't really know how to go and find good deals.
When you know how to find Motivated Sellers, you can often buy property massively discounted from the true market value. They might be flexible on the terms of that sale and do things like Vendor Finance, Purchasing Options, all of which are strategies which work much better when the property market's coming down.
So I'm quite excited about what's going to happen in 2021 in the UK property market. I don't know with certainty what's going to happen, but I do know after every boom, which we've had recently, there's always a bust. I did expect the bust to happen at the end of 2020, I'm very honest and open about that, when I write these blogs, we're putting it out on the internet forever. But I sincerely believe, based on what I've told you today in this training, I think we're going to see a property market crash 2021.
So, stay tuned for more information, all about what's happening, I do these monthly updates, I tell you how the situation changes. The next couple of months we're going to see the impact of the budget, how's that going to affect property prices? And also we're going to see what happens with the Furlough scheme. I'm sure there'll be announcements about these very, very soon.
In the meantime, if you want to learn how to find really good deals in your area, whether you're new or an inexperienced investor, I'm doing some online training. There's a link at the bottom of this blog, you can click and come and join me on that online training to learn all about how you can find great deals in your area. I believe there are great deals everywhere if you know what you're looking for. You don't have to worry about funding them, when you find good deals, you'll be able to work with other people. So click on the link, come and register for that training.
If you would like to learn more about how you can find great deals in your area, join Simon Zutshi on his FREE online webinar - 'How to make a full time income working part time, as a Property Deal Sourcer.'
Click here to register your place
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