In the previous few months, real estate prices have continuously broken records and climbed to unprecedented heights. The UK real estate market’s definition is that as the population grows, the long-term supply of residential properties exceeds demand. If we add low mortgage loans and ultra-low interest rates to the portfolio, the real estate prices we get will rise over time. The blockade has threatened the livelihoods of many people, but the financial situation of others is better.
At the point when the real estate market reopened after the first national blockade, many home buyers flooded into a relatively shallow UK real estate market to secure purchases. As shown in the chart below, although the direct impact of the first nationwide blockade on real estate prices was negative, prices rose when the market opened again. In addition, when prices rise, many people will rush to catch up with the trend-this is called “grazing” The theory states that we feel safer in the crowd at an unconscious level and find it difficult to “ride upstream.” Herding is most common in stock market transactions, but it may also be related to the real estate market. Psychologically speaking, we may be more willing to buy real estate when other people also buy.
Dark Clouds Gathering Over Real Estate
In the next few months, the British economy will almost certainly suffer from rising unemployment, and there are fears that the recovery of a property will multiply. Once the stamp duty discount expires at the end of March 2021, the motivation to purchase real estate will weaken. A large number of forced sales may cause prices to fall sharply, especially when the economy is stagnant. Experts predict that by 2021, real estate prices in certain areas will drop by as much as 14%.
The Bank of England predicts that Brexit will have a major and lasting restraint on the British economy. In addition, in the medium term, taxes are likely to increase to cover some of the British government’s borrowings to ease economic conditions during the lock-in period. Taxes may specifically target landlords who rent out directly.
Location, Location, Location
Sometimes, the overall price increase or decrease may obscure the structural changes within it. We are likely to be entering a new era in which more employees will work from home. The pandemic blockade forced companies to give remote work a chance, but it did work. As a result, many visionary companies announced that they would release office space, especially in London.
Similarly, in the street shops, many retail chains are reducing the number of their branches or joining management departments due to the increase in online shopping. Business people are already considering turning all these unwanted spaces into apartments.
This constitutes a structural change that will affect “buy on-demand” office space and residential properties. The initial supply of unrestricted apartments may increase more quickly. Simultaneously, as professionals flee the city center to find more space to work from home, generally speaking, the competition for the limited supply of family housing may intensify. The market has shown that the premiums that houses in national parks attract are even higher than before-possibly because people want to be close to parks and outdoor spaces after the COVID.
Judge Which Suits You Best
Successful economic participants, such as the legendary Warren Buffett (Warren Buffett), can stop and think about themselves instead of following. In the short term, the possibility of real estate prices falling or stabilizing is greater than the possibility of continuing to rise.
In addition, a no-deal Brexit may further suppress London prices. Prices of quality homes in other parts of the country are unlikely to fall-when prices fall; many homeowners will not sell at all, reducing the supply of houses for sale and supporting prices. This is because many people want to move to a place where they can use more outdoor space after being confined in a small apartment in the capital. Besides, many people may work from home instead of in London.
Tax increases have recently hit the buyer leasing market, and there will likely be more. But historical records show that, in the long run, the prices of high-quality properties in ideal locations tend to rise sharply.