2022 has been a turbulent year for the UK economy. The fallout from our shortest-serving Prime Minister and ill-fated mini-budget is likely to be felt for some time. Sensationalist news headlines have predicted a huge property crash for next year, so should you still be investing in property?
“We must remember that average house prices are still around £47,000 higher than they were at the start of the pandemic and, whilst not all will agree with me, I think it unlikely that all these gains will be completely reversed by the cost of living crisis. We are already starting to see wage growth in some sectors and mortgage capacity (and therefore house prices) are linked to wages. It will no doubt be a challenging year ahead for the housing market but whilst it is starting to take a hit, it has not been knocked out.”
Anthony Codling, CEO of twindin
“Despite many commentators and so-called experts in recent weeks seemingly encouraging meltdown within the property market, the latest figures show we are now merely starting to see a steady return back to pre-pandemic normality. The measured pace back to a balanced market should be celebrated yet also met with the reality that we are not seeing, nor will we see, a housing market crash.
Although we are now seeing a slight reduction in price growth, with perhaps temporary and marginal price decline to follow as the market normalizes again, grinch-like forecasts and fears of a property market crash should be put to bed as fixed rate mortgage costs now reduce as an early Christmas present for homeowners. With dwindling economic headwinds in 2023, we expect the property market to perform well.”
James Forrester, Managing Director of Barrows and Forrester
This may be shocking to many, but with the divide between interest rates and inflation, it isn’t by keeping your money in the bank.
The current Bank of England base rate is 3.5%, yet the CPI annual 10.7% (down slightly), meaning that your savings are losing 7.2%. However, if you look at the Retail Prices Index, which is the measure that most trade unions use for wage negotiations (as they feel it is more reflective of actual living costs) the rate of inflation stands at 14%, meaning your savings are losing 10.5% – by staying sill you are losing money.
What about the other investment options?
It is possible to ‘make a quick buck’ on the stock market, however a reports suggests that stock market volatility has been “extremely elevated” in 2022. You could make a lot of money, but you could lose everything. Cryptocurrency is another extremely high-risk strategy and has exceeded 100% on the Bitcoin Volatility Index three times in 2022. By comparison, property demonstrates its stability time and time again. Whatever happens, you have a physical asset that can be sold.
CEO of Alliance, the Real Estate Fund, Iain Crawford commented:
“Despite the challenges of economic uncertainty the housing market continues to hold up pretty well, with the latest figures showing prices marginally down when compared to last month. As expected, challenges such as increased mortgage costs and the usual seasonal slowdown at this time of year have started to bring us back to pre-pandemic normality. Those expecting a housing crash are likely to be disappointed as real estate remains one of the most sensible investments you can make”
Long term, property prices always rise. However, it is important to remember that property income does not come from capital growth alone. Additional streams of income are also available for property investors in the form of rental income and capital allowances (if you organise your portfolio efficiently). Investors should consider that, if less people are buying property, it follows that there will be an increase in rental demand, therefore pushing capital achieved from this income stream higher.
(Source:JLL)
If you don’t want to see your savings dwindle, we fully believe that investing in property is the correct decision.
Redmayne Smith provides an end-to-end service to support you fully through your property investment journey. To develop your personal property portfolio, book a consultation with one of our Investment Consultants now.