Within AWM’s Private Investor Club, we have been speaking to several seasoned property investors, many of whom carry a different current stance on the sector, but all seem to share a common outlook. While some view this immediate period as time to wait, watch and digest, others are seizing this as a real opportunity to actively source the right type of deals.
Most experts in the world of property feel the property market will fall this year anywhere between 2.5 – 3% and will then bounce back in Q4 2020 with some experts suggesting a 5% rise in 2021 as the market begins to recover.
When an entire country has been in lockdown, one thing is for sure, we can expect to see a build-up of latent demand for genuine homebuyers returning back. Whilst no one really knows how long the UK lockdown will last or what impact it will truly have, there are some questions that will be asked of how certain real estate sectors will perform. For example, how adversely will commercial property be hit especially after companies understanding that in fact a number of their employees can operate perfectly well from home.
In times like this we need to understand the key fundamentals about the UK real estate market. It’s no surprise to hear that as a nation we are suffering from a housing shortage – we are currently short of around 1.2 million homes and the need for new homes keeps increasing. With the help-to-buy scheme extended to 2023, there will be a strong and steady demand especially within the starter homes sector.
Ultimately, with the interest rate now cut to the lowest in UK history at 0.1%, it provides an ongoing stimulus to activate the property market. However, this comes with a caution sticker as the lending market has shrunk significantly and most lenders are not actually cutting their rates, nor are they currently lending. In fact, many are seen to increase their rates due to a lack of lending supply. This will need to change to see things improve. If the lending improves, buyers will enter.
It is not just the homebuyer market that is being affected by lending, developers are also facing a huge struggle with a number of lenders pulling their deals from the market. This however creates an excellent opportunity for property investors to co-invest with seasoned development professionals. In times like these you have to tread carefully but also understand the fundamentals and learn from previous cycles.
In my personal view, the words of Warren Buffet ring to mind: “Be fearful when others are greedy. Be greedy when others are fearful.”
The most experienced property investors echo a similar attitude, saying that a market in shock and despair provides an excellent buying opportunity. Some will see this as a once in a generational opportunity to really build something and go out to find those right opportunities.
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