Should I Wait for the "Housing Crash"?
Blog By:
Hannah Aspinall
Co-Founder of the NPP Group and Director of Northern Property Partners
Honestly, a question that rages on and on and on. And has done for a few years now…
In March 2020 when Covid shut the UK down for the first time, media said there would be a “housing crash of a lifetime” with a huge drop in property prices. (1)
It felt like a mass exodus would occur of all buyers and the “crash” was imminent. And yet shortly after all the fear spreading, the housing market took an unexpected positive turn and saw one of the biggest booms noted for some time.
NPP also experienced the upturn of investors wanting to take advantage. Properties were cheap and the rents were high. It felt like these investors knew something no one else did! Multiple incredible deals to be had and investors wanting a piece of the pie…. 12 months later and it appeared everyone had caught onto the best kept secret, and house prices sky rocketed! (2)
Fast forward to November 2022, we are dealing with the mortgage rate rises and constant negativity back in the newspapers about the impending “housing crash”. Are they just repeating the same stories because fear sells papers?
Why don’t we do facts, not fear? Investing should be about that should it not…
Firstly the demand for property is still high due to a lack of supply which means that although prices are now no longer 10% over asking price, they are still not plummeting and nor is it likely to due to the need outweighing supply. (3)
If we look at Nationwide’s latest house price index (4) it shows house price growth slowed to 7.2% in October, from 9.5% in September. Still growing though!
NPP are involved with around 240 property transactions a year in the investment end of the market and we have been seeing prices cooling off over the past few months. 6 months ago we were having to out bid by 10-15% above inflated asking prices…. This is not the case now and one could ask, are we already in the dip?
Looking at metric like Return On Capital Employed (ROCE) we can consider whether now is a good time to buy, HOWEVER when you’ve been a property investor as long as I have you know that most wealth is created in capital appreciation and not (ROCE) or cash flow. So, if the market’s cooling and confidence is lower than 6 moths ago, arguably now is a great time to buy! And I am!
Warren Buffet said about investment markets “be fearful when others are greedy and greedy when others are fearful” . The point is, when confidence is low there is a lot of future wealth to be made! Statistics clearly show over the past few hundred years, that the UK property market only cycles up, and therefore getting into it is more important than waiting for the lowest point in the market…. Surely you only know the lowest point once it has been and gone. (5)
The point I am trying to make is, there is no wrong time to buy when using the right strategy. NPP are finding social housing ( another growth market ) a really popular investment at the moment. With fixed rents and the guarantee of no voids and most maintenance issues covered. It is a very risk averse way of capturing an investment that works now, secures your income for long periods and gives you the all important ‘time in the market’ which creates your wealth pot.
Personally I am still buying, I am still active in my approach because I know the longer I stay in the market and with more scale, financially the better off I will be.
Waiting (in my head) just enables the current inflation (11% which means your money is worth less) (6) to seriously erode the value of my savings sat in the bank, instead of increasing my monthly income by investing correctly. Waiting means I miss out on months of positive cash flow and time in the market to grow my wealth in capital appreciation waiting for the “perfect time” or the “perfect property” means I likely miss multiple opportunities to grow my income, grow my wealth and enjoy a better life!
Ask yourself this, what are the consequences of you not putting your money to work today? For me, that risk is too great, hence I always take action! What about you?
If you want to have a chat with one of our investment specialists about this article or with investment help, please click the link below to arrange a call.
- https://www.chroniclelive.co.uk/news/property-news/uk-house-prices-coronavirus-2020-18347439
- https://www.forbes.com/sites/saibala/2021/04/27/the-covid-19-pandemic-has-fueled-a-crisis-in-the-housing-market/?sh=556082f25928
- https://www.ftadviser.com/property/2022/08/10/uk-housing-demand-still-outpacing-supply/
- https://www.nationwidehousepriceindex.co.uk/reports
- https://www.propertygeek.net/article/the-18-year-property-cycle/
- https://www.ons.gov.uk/economy/inflationandpriceindices/bulletins/consumerpriceinflation/october2022
