#83 - Where will property market be in the next 5 years?
What I’m Watching
Another great interview on the Jay Shetty podcast, this week with Arnold Schwarzenegger, on how to change the trajectory of your life. I’ve always been a big fan of Arnold and most people know about his story and have watched many interviews over the years. However, it’s still rare to see such a personal conversation where at moments you see Arnold drop the bravado and open up and tell stories that I haven’t heard before.
Two main lessons I takeaway from this video is that to be a successful entrepreneur it’s critical to learn how to sell, which Arnold has done all his life. Secondly, pain is critical for us to grow and learn from as human beings.
Resource of the week
Everybody knows about LinkedIn but I feel that most people don’t leverage it to its fullest. For example, instead of quick-applying for jobs it sometimes helps you stand out to find the hiring manager and send a message directly to form a connection.
On a personal note, this week it helped me solve a problem with my estate agents. They have been outright ignoring my emails for about 5 weeks, I sent about 7 emails gradually cc’ing more and more people in, including managers of all local branches but heard nothing back. So I decided to look them up on companies house to find the director and parent company (one of the top 5 largest estate agents in the UK) and connected with the CEO and complained. I had a call from the person I was emailing within 30 minutes of hitting send.
Connecting with the right people is vital in any business but especially in property and LinkedIn can be a great resource for that.
Quote
Strength does not come from winning. Your struggles develop your strengths. When you go through hardships and decide not to surrender, that is strength.
Arnold Schwarzenegger
News and trends
- Two and five-year fixed-rate mortgages continue to fall.
- The highly anticipated renters reform bill will get a second reading next week, it has been confirmed by the government.
- A surge in property listed for sale in Scotland.
- I’ve been hearing that several TikTok creators are reporting that their videos are randomly disappearing. This is different to videos that get reported which violate community guidelines as you’ll get a notification, some are noticing videos are randomly hidden on other people’s devices. Another reminder that it’s important to diversity and not rely on a single platform.
- This YouTube video is really mind-boggling. Colin and Samir showcase an AI tool that translates your voice to other languages and deepfakes your lips to match. Considering it’s already convincing and it’ll only improve, it’s exciting and scary at the same time. How will we know what’s real when we watch video footage in the future? Especially as this technology becomes more easily available to the masses and advanced.
Thoughts
There have been a lot of question marks in the property industry as of late largely driven by the 14 Bank of England base rate rises which have squeezed affordability and will continue to have a lagging effect as people come off old fixed rates and onto the new products. As a result, we’ve seen a surge of properties come onto the market. In a recent survey, 8% of landlords said they intended to invest in property in the next year while 37% plan to sell in the next 12 months. So does that mean property is doomed?
Well, to get an idea of where things are likely to be in the next 5 years and beyond let's have a look at the current situation.
House prices have actually been surprisingly resilient, according to the Land Registry as of August the average property price stands at £291,000 from a high of £293,000 in November 2022. Of course, we have experienced a lot of inflation so adjusting for that in real terms, the gap is bigger but incomes have also gone up and affordability is stronger.
We’re also seeing banks increasing their appetite to lend with more products returning to the market.
At its core, here in the UK we have a supply-demand imbalance that will drive property prices up over the long term. This is evident from the fact that we’ve seen rents skyrocket over the last year as landlords exit the market. Rates are very high now, but it’s not unprecedented, in fact, the opposite, historically rates have always been much closer to what we have now.
It is a challenging time for the industry for investors where achieving the cash flow is difficult at the moment. Talking to my broker, we are seeing more investors look to strategies that allow for higher cashflow such as HMOs.
In property investing, as with other types of investing, to succeed it’s key not to follow the crowd and look at the bigger picture, where most people are hyper fixated on what’s going on now. The demand will always be there, there are much stronger stress tests than before 2008, so people aren’t overleveraged. Banks have an increasing appetite to provide credit to people demanding it. Rates are easing down while rents are rising with inflation, once things settle I see it as business as usual. So I would put myself in that 8% of landlords looking to invest, but also accepting that the margins are very slim at the moment and that it’ll improve as time goes on. The main thing is to look out for deals in the market as a large part of the gains is made on the purchase. What are your thoughts or plans? Interested to hear, just hit reply.
Have a good week!
Hans