One of the most popular questions I’m asked is What is the property market doing now? and where do you see property prices in the future. Now, I’m no mystic Meg and no one can predict the future but there are a number of facts to consider.
Currently, the property market has levelled off, its still buoyant if priced correctly but we are currently mid-cycle in regards the ups and downs (apart from London where its seen a correction mainly due to the staggering price growth between credit crunch and 2017, mixed with Brexit). This snapshot of the property market, might lead to interest rates being kept low for longer. Historically, a large fall in the market happens every 18 years but over the long term, property prices double every 10 – 12 years. Inflation and House price growth are intertwined and with high inflation comes high house price growth, however, high inflation also brings interest rate rises.
Personally, I don’t think we have had the full impact of the Quantitative easing program yet and in the public sector the Government have increased salaries and we have seen National minimum wage increases. This, on a long term basis will increase inflation and therefore property becomes more affordable and house price growth will set in – but not for the next 3-4 years. We are all sat tight to see what Brexit will bring and new legislation and market disruption is changing rapidly in the housing market in the short term.
‘Housing Crash’ , ‘Market crash’ are terms used by the media but what actually happens in a housing crash? Historically, property prices only drop by a maximum 20% as an average, this period of time is very unsettling and no one likes a recession, the bigger question is how long it will last. The credit crunch of 2008 was only one year, whereas, the recession in 1989 was prolonged for 5 years and was much harder, however, in both cases property dropped by 20%. This is the main reason why banks like 75% – 80% Loan to value mortgages, limiting their risk.
James Cann said, ‘More property millionaires are made in a recession / property falling, than any other time.’ Warren Buffet said, ‘Observe the masses and do the opposite’. Many professional property investors will turn a gear up during these times and enter the market buying when no one wants to buy or too scared to buy an asset that is falling in price but here is the point. The asset has a strong value and is tangible, they know in the medium / long term the cycle will change and uplift. Population increases, however, you cannot make any more land – its finite. Property is a basic human need, just like food, undertakers or tax collectors. The demand is always there.
Why right now is a great time to buy property? Interest rates are low and in my view will remain low in the short term, 3-4 years, its a great time for making over payments and reducing the mortgage/debt and building equity. In the medium to long term, inflation, salaries and the QE will kick in and property prices will increase (although interest rates will increase along side when it happens, so it is a balance). We are currently mid-cycle and whilst the housing market is mature, it is currently taking a breathe and will remain stable for the next 3-4 years.
I am introducing some new exciting services this year – so watch this space !
My staff member of 10 years, and friend, has been saving for years now, stuck in the rental trap. Increasing rents and being forced to move home every 6 months or year, she has moved 4 times in the past 3 years. She has a young family and desperately wants a forever home and stability for her family and children. Some landlords are being forced to sell due to legislation changes and whilst they would prefer to keep their asset until retirement age, are looking to dispose now and currently another investor will come along and snap it up. This is why, I am launching our Rent-to-Own service.
For the landlord, how would you like a tenant, who treats the property as their own? Will let the property guaranteed for 5 – 7 years? no void periods. The tenant will deal with maintenance at their expense and a disposal at the end of this period, selling when you are ready at a specified time in the future, not when the Government makes legislation changes. The purchase price is agreed at the outset and the tenant knows, the property is as good as theirs. You’ll also know you are really helping a young family, like my staff member to reach their goal and own their own home.
For the Tenant, the purchase price is agreed today. You can treat the property as your own, security of tenure, add value with a new kitchen or extension, in the certainly knowing that you can buy the property in X number of years time, pre-agreed. Any house price growth or added value is yours. This new service I am launching is called Rent-to-Own. Buy now pay later. Set the price now, purchase at a pre-agreed time in the future.
This new service Rent-to-Own is legally called a Lease Purchase Option Agreement. Lease for a set period of time, at a set rental price, with a pre-agreed purchase price.
I’m very excited, this is a great solution, the market demand is there and I have a list of Tenant buyers but I’m keen to hear from any Landlords who would like to use this service or it could be someone who is currently on the market struggling to sell.
Thank you and I look forward to hearing from you.
James Scollard – Owner & Founder of CLIFFTONS. [email protected]
Posted: 12th April 2018