I quite liked the title of an article by Hillary Osborne in The Guardian “The risks are pretty big: how long can UK prices defy gravity?” Yes, the markets pundits are subtly hinting a possible real estate market correction. And the reasons they are stating are plausible. Compared to property markets globally, it is no secret that the UK has one of the most stable property markets in the world, with transparency and regulations that have made it an attractive investing destination for both domestic and international investors. For decades, the UK property market has grown steadily year after year. The overall geo-political situations in current times along with the pandemic have created some unusual circumstances that has inflation spiralling off the charts and rising interest rates are only adding to the misery. The rate of growth is slowing, according to Halifax's Property Price Index, and the bank's managing director, Russell Galley, told The Week, “With interest rates on the rise and inflation further squeezing household budgets, it remains likely that the rate of house price growth will slow by the end of this year,”. Recently, Knight Frank forecasts “UK house price growth to slow as cost of living bites”
Economic circumstances, interest rates, demand-supply imbalances, and buyer sentiments all play decisive roles in the property pricing. In the current scenario, it is possible that the price corrections are around the corner. The rising interest rates may dampen buyer sentiments to some extent. However not all is gloom and doom for investors. The residential and HMO buy-to-let markets are expected to see increased demand. Rental markets could be buoyant as more and more people seek to work from home. Despite the fact that London property prices are twice the national average, the rental yields are lower than borrowing costs. This is where the smaller towns in East Anglia and Midlands are becoming more attractive owing to higher rental yields. So, with some correction the deals are only going to get sweeter. Perhaps, it’s a good time after all to buy-in.
At Novyy, we are extremely focused on smaller towns and captive audiences such as corporate, student, NHS or other government housing, new migrant working population, and so on. The demand for single rooms has been astonishingly high. This means we are looking at creating a great pool of investible buy-to-let stock with higher rental yields outside of the likes of London and Manchester.
Timing the market is nearly impossible, but any price correction is an opportunity to buy-in to generate high-yield passive rental income, which investors should take advantage of.
For those who are first time home buyers, trying to time the market may not be a great idea unless you are up to speed on the local stock availability and sentiments around the area. A detailed examination of stock on several of the property portals reveals that many of them are lowering prices multiple times. To get the right price, use your own valuation expert and compare the report to the one provided by the seller.
One thing is certain: as affordability takes a hit, the price rise of the recent years will soften but demand for rental properties seems to be on the rise in many commuter towns of London, university towns, and regions near hospitals nationwide.
Should you invest during a correction?...
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