Why the 2020s will be a unique opportunity to buy property? And what will happen to the property market in the next decade?
The 2020s be a unique opportunity to buy property and the next decade is set to be a unique buying period. Here are our predictions as to why, in our opinion, the 2020s will offer lots of opportunities for investors.
Post-recession and Brexit – a buyer’s market
In the decade since the end of the last recession, house prices have increased much more slowly than in the 10 years before the slump. Add into the mix Brexit, where worried buyers and sellers are waiting to see what will happen to the property market, and you have a stagnant housing market.
The unease was especially pronounced in September and October this year when prices fell by an average 0.1% – although there was a slight increase of 0.9% over the year as a whole. There was also a 12% fall in the number of properties for sale in estate agents’ listings in October.
Which? magazine explained why potential property buyers are delaying any decision – with concerns over Brexit being key. In the 2020’s – with clarity once Brexit is over – we will see some return to essential moves and buying that had been put off.
The housing market will get moving again with the potential of opportunities from motivated sellers.
The pressure to keep interest rates low – tie in a fixed-rate deal
There is a pressure to keep interest rates low – low and stable inflation supports growth and jobs. The Bank of England reports that over the past few years, our economy has needed interest rates to stay low as we recover from the global financial crisis.
Continued low-interest rates typically means good news for investors who can take advantage and tie in a low, fixed-rate mortgage deal.
An increasing population – more demand for housing
Why the 2020s be a unique opportunity to buy property? More demand means that this market is strong and good be a good long term investment.
Official statistics estimate that the population of the UK will increase by 3.0 million from an estimated 66.4 million in mid-2018 to 69.4 million in mid-2028.
The figures also suggest that during the same period, 27% of UK population growth will result from more births than deaths, with 73% resulting from net international migration.
Housebuilding – there is still a chronic shortage of housing
2019 house building targets – did we reach them?
The current housing shortage is recognised by successive government targets for new house building. The target set by former Prime Minister Theresa May was 300,000 new homes a year.
In practice, housebuilding has fallen woefully short of that target – and is, in fact, declining. The number of new homes started in the second quarter of this year in England was only 37,220 – 8% fewer than in the same period last year and 24% lower than the height of house building in March 2007.
Future house building targets
In response, the current government announced that it was maintaining the same target of 300,000 new homes a year, but would also:
- speed up the planning system;
- champion the creation of new “garden communities”;
- make greater use of brownfield land; and
- increase housing density by allowing existing blocks of flats, offices and shops to be extended upwards.
Of course, some of these plans may change following the General Election (you can read some of the election promises for the PRS here).
Land banking – demand for stock
One of the paradoxes of stagnant or falling house prices is that developers tend to land bank, rather than starting to build new homes, according to research conducted by the UK Collaborative Centre for Housing Evidence.
There will be a greater need for stock, so developers and investors can typically enjoy a profit on any land they sell.
Why the 2020s will be a unique opportunity to buy property? Whatever your investment strategy in the coming decade will be, it is not time to make any assumptions. There are lots of unique events happening which are having – and are going to have – an impact on the housing market. Don’t simply ignore these goings-on. Keep up to date with developments as this will allow you to move quickly should you choose to. The informed investor tends to make better decisions and in turn will more likely to become a successful investor.
Please note, this was written pre-the General Election.
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