For those invested in the market it may not come as ground breaking news, but the COVID property market impact hasn’t been as bad as many expected it may be.
It’s relevant because it now looks as though the UK economy could be set to enter a recession in the coming months, with inflation at a decades high whilst shoppers stay home and decide against spending their money, exacerbating the problem.
In the meantime, the stock markets are sinking and there is news this week that cryptocurrencies are crashing too. The US isn’t faring much better either, and it looks as though these economic struggles may last through until at least later in the year.
Terra, one of the largest stablecoins in the world, which is pegged to the dollar, started to collapse earlier in the week, and the Guardian reported ‘Bitcoin and ethereum are both down 30% in the past seven days, with smaller cryptocurrencies such as ripple, solana and dogecoin falling more than 40%. Binance, one of the largest US cryptocurrency exchanges, suspended deposits and withdrawals on Thursday from 11.30am for what it said was scheduled maintenance.’
UK property investment a safe bet?
These global uncertainties are causing many to turn to the UK property market if they haven’t already.
UK buy-to-let investments are presenting not just safety and safe returns, but very strong inflation busting returns which, in this climate, is phenomenal considering.
We’re also now seeing just how strong the fundamentals of that market are as it’s revealed that the COVID property market impact wasn’t as bad as many feared.
As reported by Max King in Money Week, ‘In the residential market, house prices seem high but have been driven there by structural trends that are unlikely to reverse. The market for flats in tower blocks will need the overseas buyers to return.
House prices are regularly described as absurdly high and unaffordable but, though supply is steadily increasing, government plans to ease planning restrictions appear to have been scrapped.
It is easily forgotten that, athough prices have soared, financing costs have slumped. Mortgage rates hit 15% in the 1970s and 1980s but fixed-rate money is now available for under 2%. The cash cost of mortgages is high but most of this cost consists of loan repayments and hence, wealth accretion.
Unless and until interest rates rise markedly, most of both the commercial property and domestic property markets are on solid foundations.’
This echoes something we’ve been talking about for some time now, that for investors looking at the long-term potential of their property investments, the fundamentals really aren’t going to shift a marked amount that will cause any sort of great crash.
Yes, things are going to slow, that is absolutely expected following the explosion in demand following the pandemic, but supply isn’t even close to meeting demand and even if the government decided to build five million new houses today, they wouldn’t come to market for at least another two years and would need to also follow marked rises in interest rates to make a noticeable dent.
If you’re looking at investing or increasing your investments then the fundamental reasons that the UK property market has been so stable and profitable really won’t change a great deal in the coming years. Why not take a look at some of our available, income-generating buy-to-let properties here.
