Property News - March 2022 | Property Investment Blog

Property News – March 2022

So here we are again in the midst of a great deal of negative property news. However, when we dig a bit deeper, is that really the case?

So as you are likely to have noticed, there is a great deal of speculation in relation to the property market and how it will be affected by the impending interest rate rises, inflation and of coures the Ukrainian conflict.

If we look over the last 5 years, there have been many reasons not to invest according to the UK’s popular media. We have had Brexit, general elections, COVID-19 and now the latest being the Eastern European conflict.

However, despite all this, the property market has continued to strive forward and reach an all-time high despite experts predicting otherwise, including the BoE predicting drops of up to 30%.

So, let’s take a deeper look at some of this news.

Ukrainian Crisis

So the main effects we are set to witness with this crisis is the increased cost of various imports such as cereals, animal fats, wood, metal, steel, etc. All of which are set to push up the cost of living, especially on food, energy, and property. We have already seen the impact this has had on the increasing costs of new builds.

This means developers are running on tighter margins and in turn, may put a halt on future developments they have in the pipeline. This then creates a upward demand on housing which then pushes up both prices and rental demand.

This will ironically have a positive impact on the market and increase the returns for you as an investor (as long as you get in now before the prices increase further).

Inflation

So this has been at the forefront in the popular media in recent months and the main reason we are witnessing the upturn is mainly due to the rising energy prices which have been seen globally.

This is the main reason we are seeing interest rates rise but the reality is that it’s going to have little impact, regardless of the prices increasing, people will still pay it as it is a necessity. Take the cost of petrol as an example, people on the whole will not stop driving, they will simply find the money they need to drive in order to work and move around day to day

Interest Rate Rises

So this has been a constant topic on people’s minds over the last few months and as we all know, interest rates are increasing. We saw on Wednesday 16th March that there will be an increase of 0.25% taking interest rates to 0.75%.

Now if the bank passes these increases straight onto the buyer, this will have an impact on affordability and in turn, could have a negative impact on house prices. However, at the moment, we are seeing mortgage lenders absorb these increases. Also, another important thing to look at here is if first-time buyers are negatively affected by the interest rate rises then they will simply rent for longer, pushing up rental prices and making a better market for investors.

Along with this, we are still only at rates that were in place pre-Covid so we are no different from 2 years ago, and the market was thriving then.

For more information on the impact of interest rates within the property market you can read our blog or alternatively you can watch the recording of our latest webinar below.

Blog version of ‘What an Increase in Interest Rates Means for Me’

 

UK Economic Recovery

During 2020 the UK economy plunged 9.4% due to COVID and multiple lockdowns.

However, hot off the press today, we have seen that in 2021 the economy bounced back with 7.5% growth. This is its strongest annual expansion since the Second World War.

Another piece of evidence showing that the UK is a stable place to invest.

Our View

Although these rises will no doubt slightly impact on the property market. We feel that this is only going to be seen in years to come though as most people have fixed their mortgages for 5 years, therefore, are not going to feel the effects of this until it comes to re-mortgaging.

Despite these increases, people are still turning to the property market as a ‘safe haven’ especially given stocks, shares, bonds etc are seen to be more volatile and individuals have lost considerable money in recent months.

On a positive note…

House price growth in the UK hit 12.6% in February, pushing the average property price to over £260,000 despite all of the above.

The reason for the continued increase is due to the robust demand and lack of supply. As we mentioned above, with the cost of the build only set to increase further, it is only going to put more demand on the market and push prices up further.

 


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