#48 - Mortgage stability? Property outlook 2023.

What I’m Watching

Ray Dalio has written a 2 part series based on his book, Big Debt Crises, which is one of my favourite books on the economy. In the LinkedIn article, he heavily condenses the key points in the book and applies them to what we’re experiencing now, highly recommended.

Resource of the week

I’ve recently started a weight cut, and I’m going back to some old resources which helped me last time successfully hit my goal around 3 years ago. The best of which is HowtoCookSmarter YouTube channel. By far the most helpful channel I’ve come across for recipes. Almost everything is oat-based, and it focuses on simplicity and practicality.

Quote

Decision makers tend to prefer the sure thing over the gamble (they are risk averse) when the outcomes are good. They tend to reject the sure thing and accept the gamble (they are risk seeking) when both outcomes are negative.

Daniel Kahneman

Thoughts

Last year when the mini-budget was announced, it triggered a mini-panic in the mortgage markets. There were multiple base rate rises, people panicked to get product fixes and worse of all the banks were uncertain. This of course led to a lot of products being pulled and a temporary spike. Fortunately, it was only a temporary situation and mortgage rates have been coming down since November.

I’ve since had a few conversations with my broker and currently, things seemed to have been stabilised to what the new normal is likely to be. I have one property that has a fixed rate ending imminently. On a limited company BTL mortgage I’ve been quoted 5.29% with a 2% fee for a 5-year fix. In the past, I was looking around the 3.5% mark. Undoubtedly, the new normal is higher than what we’ve seen. The product fees have significantly risen, for the 2-year fix, the bank's fee is over £2,800. Very hefty considering I’d be needing to do it again in 2 years.

Now that costs are higher, experts are predicting that for property growth it’ll be a stagnant year in 2023, some predicting a significant drop, some predicting it’ll remain stable. The rising cost of borrowing is also continuing to drive landlords out of the sector and contributing to a rental shortage, particularly in the South East, where agents are struggling to maintain the number of properties to let.

For investors, the biggest challenge will be finding opportunities that can provide sufficient yield. I’m not too concerned about the long-term outlook of property prices due to all the fundamental factors. I see the shortage of rental properties continuing to drive rents up which will improve yields over the next few years.

It’s just finding opportunities now. The temptation is to start allowing ROI standards to slip, which is something I will remind myself to avoid doing, as cash flow is vital for longevity. I’m currently actively looking for the next acquisition and will keep you all updated on the progress.

Do you have any plans to invest in property this year?

Hans