UK Property Update: Busting The Myths Around The Current Market

With the economy seemingly in flux, and UK politics experiencing a severe lack of stability this autumn, many investors have begun to lose faith in the current property market. However, upon further investigation, the current market is remarkably more buoyant and robust than many fearmongering news outlets would have you believe. That’s why we’re providing a full UK property update, debunking seven myths about the current market, what the future holds for property in 2023, and why investing in UK property is still an excellent option for those wanting to protect their assets and maximise returns.

Myth 1 – Interest Rates Are Abysmal

Although interest rates have undoubtedly risen over the past few months, this is nothing compared to historical trends of the past few decades which have seen far more severe fluctuations. In fact, investors who purchased units in 1979 saw interest rates of up to 17% yet have still experienced impressive price growth and return on investment since purchasing.

Furthermore, when placing the past decade of interest rates into a broader historical context, we begin to realise that the past ten years have been rather abnormal. Prior to 2008, interest rates sat at an average of 7% and very rarely dipped below 5% – when compared to these broader trends, current UK interest rates are relatively low.

Myth 2 – The Market is Historically Unstable

Although the market experiences peaks and troughs, the UK property market is resoundingly stable. This is thanks to our reliable political infrastructure which means that, despite frequent changes in power, the country remains stable and reliable on the global stage. As such, many overseas investors feel comfortable investing in UK property, as our markets are considerably more reliable than other countries that experience greater economic fluctuations and weaker currencies.

Growth in the UK property market is also very predictable, with house prices doubling on average every 10 to 15 years for the past century. As such, even if house price growth slows as many news outlets are suggesting, this would be akin to lightly pressing the breaks on a speeding car: the car will still be moving forward, and your investment will still be on an upward growth trajectory, just with a few inevitable bumps along the way.

Myth 3 – Inflation Is Never Good News

When it comes to food, travel and fuel, inflation is undoubtedly never welcome. However, inflation doesn’t necessarily score bad news for investors – after all, property prices will grow alongside the price of goods and services, especially new build developments, due to an increase in the cost of building materials, labour costs, and other associated factors with property construction.

Inflation is particularly beneficial for the rental market: many first-time buyers choose to ‘ride out the storm’ and wait for more favourable house prices and interest rates before they commit to a purchase, thereby keeping them in the rental market for longer.

Although the number of renters may increase with inflation, this doesn’t necessarily mean that purchasing a property during high inflation is unadvised – after all, property is one of the most stable asset classes to funnel your funds into. Cash and bonds lose value as inflation rises, making it sensible to instead invest in alternative assets such as property that can provide returns that are higher and more sustainable when compared to other asset classes. Additionally, the cash value of mortgages will be worth less when inflation is higher, meaning that those with buy-to-let mortgages might technically owe less money to their lender.

Myth 4 – Stamp Duty Has Little Impact

Kwasi Kwarteng’s mini-budget this autumn reinstated Stamp Duty Land Tax cuts, with new Chancellor Jeremy Hunt vying to keep these proposed cuts in place for purchasers. This can help investors – both overseas and in the UK – to save up to £2,500 on their next property purchase thanks to these new tax incentives. Namely, Kwarteng increased the threshold on which UK Buy-To-Let investors need to pay 3% stamp duty from £125,000 to £250,000, allowing them to recoup thousands on their non-primary residence investments and reduce their upfront costs.

Myth 5 – Property Prices Are Plummeting

With household bills and mortgage costs seeming to rise exponentially, many homeowners and investors fear that property purchase prices will take the brunt of this impact by over-compensating with a dip in asking prices. However, this does not seem to be the case – forecasts look resoundingly positive for the coming years, with rental values and property values both set to increase across key UK locations. In fact, JLL has predicted that all key cities across the UK can anticipate an average boost in property growth over the next 4 years of between 2.6% and 4.9%. Furthermore, Birmingham is experiencing greater growth – particularly pertaining to rental yields – than ever before. Unfortunately, such positive news and predictions does not encourage as many ‘clicks’ or newspaper purchases, hence the swarm of exaggerated information and inflated statistics that has began to plague homeowners and investors alike.

Myth 6 – Overseas Investors Are Lacking Interest

With such tumult in UK politics and perceived economic instability, many fear that overseas investors will be deterred from continuing their property purchases in the UK. Thankfully, with the value of the pound falling against dollar-pegged currencies, overseas investors can make significant savings on property. By taking advantage of lucrative exchange rates, overseas investors will be able to save thousands of pounds on the most stable asset class that will steadily accrue in value, making it the perfect opportunity to maximise yields and growth.

Myth 7 – The Market Is Going To Crash

With papers such as the Daily Express threatening a property market value crash by 40%, it’s no wonder that many property investors are dubious about the future of their portfolios. However, such a crash is like an asteroid hitting the earth – technically possible, yet statistically improbable.

It is important to note that the property market has seen a drastic upward trajectory in value over the past few months, likely as a result of high demand and low supply. As such, a dip in property values at the time of writing by 15%, for example, would merely take values back to their status in July 2021 which, in retrospect, doesn’t seem overly drastic. Better yet, the status of the market as a cyclical entity ensures that for every trough, there is a comparable peak – after all, a market downturn is not sustainable and will regulate itself to the point of reaching stability, which cannot always be said for alternative forms of investment or asset classes.

So, it’s not all bad?

The UK property market is far from a crash and is actually performing superbly well for investors – demand for units is high, rent and sale prices are increasing, and Stamp Duty Land Tax cuts are providing an additional incentive for investment. For more information on the property market where you are, or how you can secure your financial future with savvy property investment, contact Joseph Mews today, or browse our current developments here.