Take a RIDE
Every month I do a review of the five key areas that make up the property market and which move prices up or down. This enables me to see if prices are likely to fall or rise in the near future so I can flex my strategy:
We know that prices are continuing to rise during the pandemic and various lockdowns and Halifax have just announced that the average property price in the UK has exceeded £250k for the first time. I give that one a 75% √
Is a factor of some of the other criteria so I’ll give that one a 50% √
We know that interest rates are at an all time low and in normal circumstances the fact that inflation has just risen to 0.7% would be a (slight) indicator that interest rates are about to go up because increased interest rates reduces demand and flattens prices. But we’re not in normal circumstances and this slight rise in inflation is nowhere near enough to suggest a base rate rise which means that mortgage rates are still low with average rates remaining below 3%. At the moment mortgage deals are still available so I give that one 75% √ .
Demand (and Supply)
Is still disastrous with demand outstripping supply substantially. The recent news about changes in the new planning proposals which looks like it’s going to restrict new house building to certain geographic areas has made the shortfall potentially worse. The pandemic has meant that new house building has slowed dramatically this year and so I give this one a 100% √
Economy and Employment
Interestingly the economy is holding up quite well and GDP in August 2020 GDP was 21.7% higher than its April 2020 low. Although we are not yet back to February levels, this does indicate that the economy is ready to bounce back, and quickly when the virus abates. Employment rates continue to fall and we now have 1.62 million people out of work. This is high for our recent history but not hight in the longer term and with the extension of the furlough scheme to March next year I don’t think this is going to get much worse this year. I’m going to give this one a 50% √
If I add up all my ticks I get a 3.5% ‘positive’ rate which is standard and within our normal range. However I do expect a reduction in this rate as the year progresses as transaction levels and demand normally falls a little at this time of year, and then we have the removal of the stamp duty freeze in March next year at the same time as the removal of the furlough scheme so I expect the property market to have a fairly stable or even static run from about now until April 2021. This is an ideal time to get cheap deals and to focus on income as a strategy.
- Gill Fielding