How often do you hear about house prices? It’s a topic we all love to have an opinion on, largely based on what we read in the tabloids. One minute prices are falling, the next they’re rising and first time buyers are being squeezed out of the market. Of course, these comments are hugely sweeping and there are clear differences in every part of the country, not just different cities, but towns, villages and even streets.
If you really want a good picture of house prices, you need to be in the market, day in and day out. We're focussed on Bedford. It’s our patch and we’re experts at spotting properties that are ripe for our investor clients. We look for single lets, HMO conversions, plots of land and even commercial conversions too. This is our bread and butter and we’ve got a nose for opportunity.
But, equally we have an interest in the macro picture and long term forecasts for house prices too. What we see from a macro point of view has an impact on local prices over the long term too. If the general sense is house prices are falling, vendors are more likely to take an offer and as buyers, we can be a bit more aggressive in what we offer. Being able to think years, rather than months, ahead on prices is very useful when planning your investment strategy.
A major new report has been published by Jones Lang Lasalle (JLL) that adds some colour to the picture for the next few years. The findings will be welcome news to anyone aspiring to own a home in the UK, particularly those buying in London. JLL’s conclusion is the "golden age" of booming house prices is about to end. You can read a good summary of the report on the Telegraph.
According to JLL, house price growth across the UK will be far slower in the next five years than in the previous two decades, with prices rising by just 1% next year and stalling in London, the report said.
For investors focussed on capital growth for their investment strategy, now might just be the time to switch to cash flow generating assets, like HMOs, or build to rent opportunities. Dare we say it, even the humble single let with a great yield might still be a suitable strategy too.
However, it’s not all gloom as prices are predicted to pick up slightly in 2019 - with average growth across the UK expected to rise to 2% - and jumping again to 3% in 2021.
This is still lower than the 6.9% average of the last 20 years, but certainly better than house prices falls and all the challenges this brings with negative equity.
The report’s author, Andrew Burrell, who is JLL’s head of economics, said the trend was down to a combination of low pay increases, interest rate hikes and, in London, Brexit – which has led to reduced demand for property from Europeans. "This can be viewed as an end to the Golden Age for house prices, or (more realistically) as a return to the pre-1970 era of stability," he claimed.
The report also highlighted some bad news for Londoners wanting to get their foot on the ladder. According to JLL, Sadiq Khan's plans to boost housebuilding won't necessarily make the capital more affordable because it won't be fast enough and there still won't be enough properties.
So there you have it. If you’re investing in London, don’t hold out hope for lower capital values to expand your portfolio, but do expect to see a ready supply of tenants who can’t get a deposit ready to buy their first home.
If you’re looking to expand your portfolio, why not consider a move north. In Bedford we’re less than an hour from Kings Cross, so close enough that you can keep your eye on your assets, but far enough away where you can buy a decent sized house for less than the cost of a studio in Peckham.