Hello Medway property investors,
I have been reading the latest Zoopla housing report which makes for interesting reading as it highlights a -23.6% flow of homes available for the year to mid-June compared to the average flow of homes onto the market in 2020. This compares with a 25.6% year-on-year increase in demand from buyers, meaning that at present supply is vastly outstripping demand.
This is a really quite shocking figure and I know that a lot of agents I speak with who focus on sales are certainly experiencing a historical downturn in supply. This is most likely largely caused by the winding down of the stamp duty holiday, with the final step now looming large at the end of September.
The stamp duty holiday has certainly poured fuel on house prices over the past year but do I think it was a good idea? It is certainly interesting to see how economists have been saying that the stamp duty holiday was a big mistake, with the tax break helping push prices up beyond any tax savings!
Well, I am on the fence really. It has certainly made up for the tremendous downturn we saw during 2020 and proved profitable for those who currently own property, however, it has driven home ownership only further away for first-time buyers and I think we will only really see the true impact over the next 6 – 12 months as things start returning to some sense of normality.
We will never know what would have happened if the incentive were not there and moreover, whether it prevented a crash which would have been a disaster for the industry! I’m sure you will recall the horrific headlines that predicted a 20-30% drop in house prices!
However, with a lack of available housing stock and a high level of demand, it means that properties are currently selling at record speeds and for record prices. Because the housing market is largely driven by supply and demand, quite simply put it means that all the while the balance is in favour of demand, prices will continue to rise.
The frustrating thing is that there is no real comparable economic climate to help Medway investors gauge where the market is going over the coming months. You could compare to the 2008 financial crisis; however, circumstances were so incredibly different that it would not be a fair comparison.
But what does this lack of supply mean for Medway property investors? Well, as mentioned above it certainly means that for those currently with properties there will be more funds available for reinvestment and portfolio expansion. The lack of demand has, for example, led to an annual price increase of 9% (£21,500) within Medway!
I personally think that those wanting to invest will need to readjust their expectations of the market and retain a long-term view. Whilst house prices may have increased, I know that rents have as well and, in particular with the HMO market, demand has remained high due to the changing working situation for many.
So, what should Medway property investors be doing? Investors should continue looking out for property deals. It may be the case that prices will drop in some areas, so I advise investors to certainly not purchase ‘at any cost’. Where possible, it could be a good idea for investors to leverage their position and potentially look to leverage a cash purchase in order to obtain a lower price and subsequently remortgage to release the cash for future investment.
Property investment is very much about long term strategy and if you are considering investing in a Medway HMO, then I would be happy to arrange a call to speak. Please feel free to contact me via LinkedIn.