To all investors and future investors
On behalf of The Jacksonheim Property Group, I sincerely hope everyone is doing well and looking after themselves and their families at this difficult time. Due to the unusual circumstances created by COVID-19, I wanted to confirm The Jacksonheim Property Group’s commitment to working with clients and provide our thoughts and recommendations considering current market conditions.
In light of the recent COVID-19 pandemic and its impact on financial markets, we remain at the forefront of the UK residential investment market. While the level of uncertainty is at an all-time high, it is important to look at your options as an investor. Between low interest rates, weak pound and under-performing global stock markets, UK property investment is a much stronger value proposition to all investors.
COVID-19 has already jolted financial markets. Since February 21, 2020, bond yields, oil, and equity prices have sharply fallen, and trillions of dollars, across almost all asset classes, have sought safety. The short-term outlook is unclear, and therefore investors should look to alternative asset classes to diversify and balance their investment portfolios.
Property is a medium to long term investment proposition. Bricks and mortar should form part of every investment portfolio. Especially, in a time of market uncertainty, providing the perfect hedge against a volatile stock market. When stocks are down investors should look more than ever at tangible asset classes, such as gold and property.
I was interested to read that house price growth reached 3.3% in the first quarter of 2020. According to IHS Markit, the average house price reached £240,257 across the UK. Northern Ireland saw the largest uptick in growth across all regions with 6.8%. This was closely followed by the North West with 4.6% growth, and the West Midlands at 4.4%.
While this was positive news, what does it mean for the market when you factor in the current pandemic? No doubt you may have heard reports that viewings were cancelled for a period of almost 12 weeks. Furthermore to this date, some viewing still remain as ‘online viewings’ only. So in the short term, we may see a temporary dip in prices, following the strong Q1 growth.
A few weeks back, the Financial Times reported that an estimated 373,000 housing transactions had been put on hold due to coronavirus restrictions. They were worth an astonishing £82 billion. So we’re heading into a unique time in the property market where coronavirus restrictions are also impacting lending and property prices.
In response to the pandemic, there were over 3000 changes to mortgage criteria in the two weeks leading into April. It was an unprecedented number of changes in such a short period of time. Twelve lenders restricted applications to a specific property type, such as new builds. While other lenders have placed restrictions by job type. This means that they are no longer willing to lend to people in industries such as travel, or retail.
That being said, one of the major benefits of property investment, is the ability to leverage through mortgages. It increases the investors potential return, especially in a low interest rate market. A low interest rate will increase the yield gap (difference between rental income and mortgage interest payments) on a property. resulting in a higher return on investment.
In response to the global stock market sell off, the Bank of England has set interest rates at a historic low of 0.10%. Those with existing mortgages have essentially received a discount on their repayments, and individuals looking to secure a new mortgage in the UK are now in better position than ever.
But here’s the thing… People will still want to move home when this is over. It’s going to create a bottleneck in the market and demand will still outweigh supply. So while we could see house prices dipping for a short period, one would think they will recover very quickly.
The market is changing rapidly, and now more than ever, it’s vital that you have a clear plan in place. You need to understand the basic principles of sourcing, finance and mortgages. If you were planning on investing in property, now is the time to prepare yourself as much as possible. This will ensure you’re well positioned when some semblance of normality returns to our everyday lives.
At The Jacksonheim Property Group it’s business as usual. Alongside my supporting partners, I am still busy working with clients so they’re well prepared for what’s to come. Would you like to arrange a call so I can make sure you’re well prepared too?
Best wishes during these unprecedented times