Boom or bubble?
Every day like many estate agents around the country we get asked ‘Is the current property market a real boom or just a bubble?’ from landlords and property investors looking to buy new properties or let their existing ones.
The topic is so widely debated, with clients looking for reassurance, that we decided to get some of our senior team together working across the business to discuss it, answer questions and give advice.
The debate focused on the current and continuing rise in house prices; whether low interest rates will be sustained, and discussing whether we will see the 1980’s boom and bust scenario play out again.
With nearly 60 per cent of the country’s £7.3 trillion net worth being tied up housing (according to the Office for National Statistics 2014), it’s no wonder that it is such an important topic of discussion and concern amongst landlords and property investors, especially as for many, it’s the main aspect of their pension.
We, like many organisations working in the industry, wish we had a crystal ball to look into the future. However, the panel unanimously agreed that nothing can ever be certain, the environment in the housing market seems to be very different this time around.
Mark Pitt, Senior Mortgage Advisor with Andrews set the scene on the housing market environment, discussing how mortgages and banks lending policies are still showing a great deal of caution. “Lenders are still being more cautious and mortgage applications are being reviewed and assessed very thoroughly. It also seems the prices won’t continue to sky rocket in the majority of places, but will find their own levels,” he said.
Jeff Bathija, Area Manager for residential sales commented that the housing market is doing what it normally does - moving in a cycle and patterns from the past cycle can now be seen, he said: “In London the pattern is clear, the housing market goes in ten year cycles and the rest of the country then follows in shorter cycles.”
“People who were put off moving in 2009/2010 when the property market was recovering from the surge in 2007 have decided now is the time to move so this has increased competition for houses. We are continuing to see resurgence in sealed bids and open houses but this is only a reflection of the competition in the marketplace. Buy- to Let buyers seem confident that we won’t however see a resurgence of double figure interest rates and it doesn’t seem to be a matter for concern for them,” he added.
Concerning the rental and Buy to Let markets, Ellie Donaghy, Area Manager for Lettings and Management spoke about tenant demand still outstripping supply in the majority of places. “Clients ask me if the bubble will burst in terms of gaining good yields from their investments. I show them the facts and they really speak for themselves, investing in the right properties in the right locations will almost always pay off but spending time researching your investment before you commit is so very important,” she said.
“From our experience we still see a large majority of people who don’t want to buy a property and feel much more confident about renting. We do seem to be moving towards a more European approach where renting a property is more commonplace than buying. This has increased competition in the lettings marketplace and whilst it’s not to the same scale as what we see with regards to sales good properties aren’t on the market for long,” Ellie added.
Summing up the debate nicely, Mark concluded: “Changes to pension investments following the March 2014 budget announcement by the Chancellor are also starting fuelling housing demand. However, in essence, it is yet to be seen as to whether we are experiencing a boom or a bubble. Only time really will tell, but what we are seeing is a different and more cohesive approach from lenders who are taking more time and requesting more information from our clients to support their applications so that they ensure that the affordability is there. We, like other agents in the marketplace present the facts to our clients and discuss how any increases in interest rates might affect the amount they pay so that they are prepared for whatever the future might hold.”
The full panel debate includes advice for Landlords and property investors and can be viewed at: https://www.youtube.com/watch?v=ALS3sqqftHA&list=UUfTAo5mig5Oc_e_T5lBZ1kg.
*Michael Robson is Chief Executive at Andrews Estate Agents
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