THE PROPERTY BLOG

There is no doubt that Coronavirus will affect the Derby and Burton Property Market, but just how?

The ensuing economic challenges are going to impact the UK property market, yet no one knows the real answer. The newspapers eulogise different opinions, but that’s all they are, opinions and everybody’s got a different one!

The truth of the matter is we don’t know and won’t know for another few months at least, if not more?

Pent-Up Demand

There have been some outstanding Government supportive measures both for tenants, landlords, home buyers and sellers, including a pause on evictions for tenants. For landlords and homeowners there have been mortgage payment deferments and stamp duty reductions to make buying a home cheaper. Whilst these are only temporary, they have done their job, meaning there is a good level of activity in the local property market.

A lot of that is pent-up demand from a couple of years of uncertainty because of Brexit. Also, we had the General Election in late 2019, so there have been so many reasons for people to sit on their hands. At beginning of 2020, it was like a water hose ready to burst with the Boris Bounce in January and February. Then, just as things were beginning to get going, we had everything freeze up for months during lockdown.

However, since lockdown has been lifted the local property market is open once again for business and there is unquestionably some impressive activity both in the sales and rental markets.

Where is the Market Going?

So, back to the original question and where are we going?

I think what we will see is a subtle change to where people want to live because of the pandemic. People working from home has shown that the need to be in the big cities has reduced and as employees have realised, they can work very efficiently from home, plus they are happier and have a better work/life balance.

Most employers are also happy as they get more work out of their staff and can reduce their costly office footprint in the cities.

The same goes for tenants as they are wanting more from their rental homes. Three trends we have noticed is there is greater demand for properties with gardens, greater demand for landlords who will accept pets (as they now can have them as they work from home) and finally, tenants willingness to pay top dollar for ‘top of the range’ properties, whilst more basic and uncared for properties without all the ‘bells and whistles’ need to go for a discount.

There certainly has been a flight to quality.

Uncertain Times Ahead

Yet, what worries me is the fundamental future uncertainty in 2021 and beyond.

What will things look like say in Spring 2021 when the Stamp Duty reductions are phased out? Any property sold needs to have completed by the end of March 2021 to take advantage of the tax holiday, meaning you need to have sold your property by November 2020 at the very latest to ensure your property purchase and sale deal goes through in time as it is taking on average up to 18 weeks between sale agreed and completion. See our blog on Sale Timescales.

This is where the difference between a great solicitor, brilliant estate agent and awesome mortgage broker compared to average ones will show.

Good ones, when all three are working together for you, can get the sale through in half the time, not the national average of 18 weeks, meaning if you are cutting it fine, you might not be able to take advantage of the tax savings in the spring. Give me a call if you want to know who the best of the best in Derby are to ensure you don’t lose out on those tax savings.

So, what is going to happen to the local property market?

It really depends on the economy as a whole and of course the property market is a large part of that. I know one thing that buy-to-let landlords and home buyers don’t like is ambiguity and the British housing market has always lived and breathed on emotion and sentiment. People will only buy and sell property and borrow the money to make those transactions happen when they feel good. Are all these things like Stamp Duty holidays just putting off the inevitable? Are we heading for the mother of all property crashes?

Well, let me put sentiment and opinion aside for a second and look at the simple facts.

That Old Chestnut…

I’ve said it before and i’ll say it again. We have an increasing population, yet we don’t build enough houses! 

Since 1995, we have built on average 150,200 properties per year. The Barker Report said 2004 the country needed 240,000 per year to satisfy annual demand for new homes and whilst the number of new homes built in the UK last year rose 1% to a 13-year high, only 161,000 homes were built.

That means over the last 25 years, with the difference between actual homes built and the targets set out in the Barker Report, we have an inbuilt shortage of 2,245,000 homes. Taking Derby as an example;

Since the Millennium, property values in Derby have increased by 172.4%

Other factors have contributed to that.

The average age of a person leaving their parents’ home in the UK is 24.4 years and that has been dropping for a few years meaning more homes are required.

People are also living longer (in 2000 the average person lived until 77.7 years and now it’s 81.1 years – doesn’t sound a lot until one considers for each additional year the average person lives in the UK, we need an additional 356,500 homes).

Finally, we have got immigration. In the year ending March 2019, 612,000 people moved to the UK (immigration) and 385,000 people left the UK (emigration) – meaning a net increase of 227,000 people (or a requirement of c.100,000 homes to house them in one year alone). All those factors in themselves mean…

We have more demand for Derby property than we have supply and that’s not going to change any time soon.

Property markets are driven, like all markets, by supply and demand so I believe property values can only rise in the long term.

Borrow to Invest

The question is whether Derby people will have the sentiment and confidence to borrow money on a mortgage and invest in Derby property, yet at the moment with ultra-low interest rates, borrowing money to buy a home has never been so cheap and if you are in it for the long-term (which you should be with property) then I think it’s good news.

Another piece of good news is that mortgage lenders are willing to lend up to 90% loan to value mortgages for first time buyers and in some rare cases, 95%, albeit with a lot of strings attached … yet this is a good sign as the banks and building societies wouldn’t be lending at these levels if they were too scared.

Investing in property, be it for yourself to live in or buy to let is a long-term game. We might see an uplift in prices in the short term because of the demand mentioned above, then again, we might see a dip in 2021 yet again for the reasons mentioned above.

Until we start to build new homes to the scale of 300,000+ a year which is something that has never been achieved since 1969, the long-term picture appears to good. Be you a landlord, house seller or buyer, you do have to be a lot more strategic and thoughtful about what you are going to do.

If you would like to pick my brains, drop me a message on social media or pick up the phone.

So those are my thoughts, tell me your thoughts for the future of the Derby property market?