Like other parts of the economy, the UK housing market is feeling the pinch from the impact of the global coronavirus pandemic. June 2020 saw house prices fall for the fourth straight month, according to data from Halifax. It could be tempting, then, for potential buyers and investors to believe now – perhaps surprisingly to some – is the time to make their move in the market.
Caution is advised, as with any investment opportunity. But risk and reward always go hand-in-hand. With the right consideration and research, there’s definite potential to take advantage of the current slowdown in the market. With the government likely to take measures to kick-start the market as part of wider economic intervention, the window to act may not be a long one.
The current market situation
Of course, it’s hard to predict what the market looks like in the medium and long term. Halifax managing director Russell Galley said: “The near-term outlook points to a continuation of the recent modest downward trend in prices through the third quarter of the year, with sentiment indicators, based on surveys of both agents and households, at or around multi-year lows.”
It’s also important to note that, while house prices are down month-on-month and quarter-on-quarter, Halifax show them as being up 2.5% year-on-year for June. If anything, it could well underline the fact the now is the time to act. With chancellor Rishi Sunak introducing a stamp duty holiday in his summer statement, it could spark a return to growth in the UK market.
What type of properties to invest in?
If weighing up whether to act now in the housing market, there are perhaps two questions to ask yourself about what to invest in. The first is location. With lockdown restrictions causing a lot of people to reassess their needs, people are now looking away from London. The effect of this is an uptick in demand in the regions, which could suppress prices in the capital.
The second factor is the increasing demand for additional space. According to Rightmove, the studio flat is no longer its most sought-after property type. Instead, houses or bungalows are now very much in vogue. From an investment point of view, this could mean that flats (studio or otherwise) now offer much less potential for attractive returns.
Key factors to consider when investing
One important factor to consider isn’t necessarily related to the asking price of a property that you wish to invest in. Instead, it could be the availability of mortgages that can put the brakes on your plans. Approvals fell back further in May, according to Bank of England data. But, with new enquiries seemingly on the rise once more, that trend could start to reverse.
With new and existing buy-to-let portfolios, you shouldn’t lose sight of protecting yourself as a landlord either. Homelet’s Rent Guarantee insurance, for example, can help if your tenants are facing difficulties in paying the rent. Other forms of protection are also available to ensure that any investment you make now stands the test of time and produces the returns you hope for.
As Halifax managing director Russel Galley concludes, there remains an expectation of “greater downward pressure on prices in the medium-term” and the full impact will only become clear in light of government support. But, with that support directed at reinvigorating a troubled market and economy, now may be the aligning of the planets in terms of investing in UK property.
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