The Current Property Market and the Pandemic by Andrew Kay (age 58 ½)
Don’t be fooled by the stories in the press about a mini property boom. Prices are currently being supported by the pent up demand, which arose during the lockdown period, by the economy being supported by the furlough scheme and by the stamp duty holiday for properties where zero duty will be paid on the first £500,000 of the consideration for all completions between 8th July 2020 and 31st March 2021. The additional rate of 3% duty will still apply to second or investment properties. However, the furlough scheme will be coming to an end in October with the inevitable consequences and the stamp duty holiday is a temporary sticking plaster. Inevitably demand will ultimately reduce and, with it, property prices.
The above issues affect demand but the other, equally important, half of the equation is the supply of property. While property prices have steadily increased nationwide since the banking crisis, certain conurbations, Birmingham included, have also experienced significant development which has flooded the local market, limiting this nationwide property price inflation. You may have seen the “Billion Pound Property Boom” on BBC2, which related to Manchester’s surge in property development. Birmingham is not far behind and as a consequence, where there is excessive supply and limited demand, a negative price adjustment is going to be felt all the more.
The Bank of England have come up with the most sensible prediction (in my opinion). They think that, nationally, property prices will fall by 16% by the end of the year. Some commentators have predicted a 30% fall but I think this is excessive. To put this in perspective, during the last banking crisis, property prices fell, across the board, by about 20%.
So why am I not uptight?
Firstly, property prices always recover, although it did take about five years for prices to recover after the 2008 crash – and that was a bad one! Secondly, the rental market is still holding up. So if you are a new investor, now is the time to buy as prices are favourable and you can save on the stamp duty. If you have already invested, the rental income will more than cover your expenses due to the low interest rates. Also, property is a robust and relatively safe investment and over time will recover and almost certainly out-perform other investment vehicles. If you want to move house, what you lose on your sale should be recovered on your purchase. Finally, all property will sell in any market at the right price!
So keep calm and hold firm!!!!
