Given the unprecedented times we’re living in it feels as though it’s somewhat premature to start talking about investment strategies post-lockdown, however, for those who have property investments and other interests it’s a question that needs to be answered sooner rather than later.
Given that the UK is now in its fourth week of restrictions, with another three likely, attention is now starting to focus on when life will start to return to normal and how business and money markets will react.
There have been some dire predictions bandied around in the past few days, but the chancellor and many other economic commentators have remarked that whilst this economic shock may be deep, it will almost certainly be short term, unlike the recession of 2008 and previous downturns.
It may not come to pass that the economy quite hits the V-shaped curve of recovery that some expect, but regardless it’s widely expected that it will at least broadly follow that trajectory as the economy slowly re-opens.
With that in mind, how should investors, and especially property investors approach the coming months and what we’re expecting to see? As always the answer isn’t straight forward, however, there are certainly opportunities to make the most of an awful situation.
House Prices
As things stand right now figures and stats on UK house prices aren’t enormously reliable given that there is a lag between the lockdown and today’s activity, however, we can say with some authority that there hasn’t been any significant dip in prices and that broadly they’ve held steady.
That is more than likely because rather than the market taking a significant hit it’s simply on hold. This is likely to translate into a medium-term dip, but not a slump or a collapse in prices.
Again, it’s important to point out that the route cause of this shock is a short-term shut down rather than any systemic or fundamental flaw with the economy, so the broad expectation is that whilst short-term pain may be felt, this will quickly abate.
The sales and transfers that had already been agreed are likely to complete post-lockdown and slowly ramp back up to pre-Covid levels. Once estate agents are able to re-open and the market is back up and running, it shouldn’t be too long until we see a return to normality.
Ripe for investment
That being said, this probably represents a ‘best of both worlds’ scenario for property investors in that the slump is likely to be temporary and slight in comparison to any sort of crash that has been seen before due to the break in activity. In an article for The Telegraph, Melissa Lawfordsaid that ‘buy-to-let investors are spotting opportunities, and are getting their deals lined up for when the restrictions on purchasing are lifted.’
This represents an opportunity in that whilst prices may drop temporarily, and some sellers may be spooked, yields and overall value are unlikely to be affected in the medium term.
There’s zero evidence so far that demand is likely to drop for properties in the Private Rented Sector (PRS), and so opportunities to acquire additions to your portfolio whilst prices are temporarily and artificially depressed represents a real and valuable opportunity to expand.
We can only hope that restrictions don’t last much longer, and that the crisis is weathered as well as possible, but in the meantime it makes sense for investors and landlords to make plans for the future, whatever the rest of the year may bring.
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