If you listen to the mainstream media, you might think that the property market is all doom and gloom.
According to the latest Nationwide report, prices rose by 0.4% in February. This masks a rather more complicated picture, where some house prices are rising, many are flat – and some such as those in central London are actually falling.
Growth may be powering ahead in the West Midlands, even if it is going into reverse in Westminster. Some areas have become overheated and are undergoing a correction.
But just as contrarian investing (doing the opposite of what mainstream investors are doing) can be a tactic in the stock market, could it be time to look at contrarian house buying? In other words, could it be a good time to buy a home?
Some say no
Some of the factors driving the market in recent years are no longer in play. Buy-to-let investors were responsible for driving up the lower end of the market, buying flats which would have been first time buyers’ ideal homes. They have been hit by new taxes and regulations, which means that being a BTL investor can potentially lose money. Many seem to be unloading their property portfolios, causing a drop in prices in some areas.
The second, and possibly even more dramatic factor is Brexit. With departure from Europe close and no deal agreed, some fear financial upheaval. This fear was not eased when Bank of England governor Mark Carney let slip that the Bank had been running ‘stress tests’ that included a scenario with house prices 35% lower three years after a hard Brexit. This was simply due diligence rather than a prediction, but many observers seemed to seize on the news, and spread another round of worries.
There is a real fear that house prices will fall – making it better to hold off buying until they have.
Some say yes
Some potential buyers, on the other hand, believe that the current uncertain market offers precisely the conditions in which to find a property bargain.
They believe that there is no obvious trigger for a house price crash. The economy actually seems to be in good shape. If interest rates stay low – as falling inflation suggests they could – and unemployment rates remain at record lows, people will have little difficulty paying their mortgages.
There will be no reason for panic selling, as there may have been back in the 1990s, when recession bit hard.
The underlying shortage of homes means that there is no reason for prices to fall off a cliff, although growth overall may remain subdued.
This means that buying a property now might be a sound investment, even if you can’t expect to look forward to the kind of growth enjoyed in recent years.
Some say maybe
If you need a home, and you find one that suits your needs, you could simply decide to buy it. You might not need to worry about negative equity – where your home is worth less than you paid for it – if you are buying it to live in, it rather than to make money.
If you are looking for an investment, you might want to tread carefully. But remember, there may be bargains to be had, simply because buyers are thinner on the ground than they used to be, and property is taking longer to sell.
Whatever you decide, the one thing you can be certain of is that the right mortgage for your needs will be essential.
It pays to get some expert advice. A call to Continuum could offer it.
The information contained in this article is based on the opinion of Continuum and does not constitute financial advice or a recommendation to suitable investment strategy, you should seek independent financial advice before embarking on any course of action.
As property is a specialist sector it can be volatile in adverse market conditions, there could be delays in realising the investment.
Property valuation is a matter of judgement by an independent Valuer therefore it is generally a matter of opinion rather than fact.
Your home or property may be repossessed if you do not keep up repayments on your mortgage
nationwide.co.uk – Annual house price growth remained sluggish in February – February 2019
uk.finance.yahoo.com – london boroughs house prices rising falling fastest – 13th February 2019