Pandemic Prediction: Property Boom or Bust?
Unless you’re living under a rock you’ll have heard of, and been affected by, the current pandemic. But what impact will it have on the property market? Are we going to go into a property boom? Or will the market go bust? Initially, everyone had thought we were going to fall off a cliff, but that might not be the case…
Despite some deals being down-valued, I’m actively out trying to buy. Valuers will be cautious, as they are being hit with claims of over-valuation from the last recession and don’t want to make the same mistake twice. Although initially, I wasn’t sure we’d have growth after COVID19 shut down the markets, I have noted everyone is actually rushing to do their buying and selling now it’s opening back up. Even more surprisingly – the properties are coming back onto the market for exactly the same price as they were pre-pandemic.
Markets are cynical, but the best way to predict the impact of such situations is to study previous events, as well as experts and thought leaders in the industry. Rob and Rob from ‘The Property Podcast’ have the ‘18-year property cycle’ theory. Having studied the market from over the last 200 years; they say that a mid-cycle wobble was inevitable; whether it be Brexit, COVID or another circumstance. Once through that, if their predictions are correct, we should hit a boom.
As the government have stepped in to stimulate the economy with mortgage/rent holidays, bounce back loans, decreased interest rates, universal credit payouts etc – we currently have false money keeping us afloat, which is why property prices haven’t dropped. Businesses, that otherwise would have gone bust, have been given a lifeline. However, unless they adapt to operating virtually (and fast) they will still inevitably go bust, as we will not be returning to ‘normal’ anytime soon – if ever. So although currently, we’re not seeing a difference, we could hit a boom, but then a dip when the false money dries up.
Property expert Ray Dalio compares the current state to the 1930s situation. This was when we were overleveraged with debt, as we are today – although now we’ve been stimulated really quickly, which surely can only mean growth right? Simon Zutshi, another expert, predicts a three-month boom, or possibly even longer, followed by a crash. In my opinion, a massive correction is imminent.
Despite the uncertainty, now is still the time to buy if you know what you’re doing. Think outside the box – look at commercial assets that are due to be repurposed when businesses go bust. Consider areas outside of London, as they are the most exciting, stable, and becoming increasingly more attractive with their growing infrastructures. Simon Zutshi’s golden rules of investing are as follows: buy from motivated sellers and secure a good discount. A low purchase price and high yield protect you in the case of a dip – as if you’ve bought a bargain with good margins, you’ve got more room for error. This is where my preference for investing up North comes from. If needed, these properties can be repurposed for working tenants or housing benefits. Ensuring the properties you invest in are covered fully by the housing benefits offered in that location means less of a shortfall in that scenario. Whereas, in London, rents often far exceed the tenant’s government entitlements.
Anyway, that’s enough from me – I want to hear your thoughts. We’re out there viewing, negotiating, bidding, but are you? Do you think the property market is headed for boom or bust? Let me know in the comments.