How the UK property market has changed
The property market in the UK is always changing, there is no constant but there are two distinct periods – pre 2008 and post 2008. It’s important to understand what happens so you’re better placed for the future.
Property Investment was king, if you said you didn’t invest in property you would have had the likes of Phil and Kirsty scoffing at you and Sarah Beeney would’ve fallen off her ladder in shock. Property was growing each year by over 10% a year and it wasn’t a case of would you make money but how much.
Of course double digit growth year after year is unsustainable especially when you consider the long term average is 5-6% growth per year. The consequence of such rapid growth was that rents fell behind, so it was hard to buy a property and be cash flow positive each month. In many cases people were making a loss each month after costs. This of course didn’t matter as long as you were making over 10% each year in capital growth.
Many people made a fortune in this market especially those who got involved long before 2008, Those who came late to the party got burnt.
The music finally stopped in 2008 and almost overnight the market changed.
After the hangover cleared we were left with a big correction in property prices – an 18% fall (Land registry figures). Today we are still 13% below the peak prices and that’s only 5% growth in four years – way below the average of 5-6% per year.
Now if you profess a love for property investment, people (the herd) will slowly move away from you and run for the hills. However just like double digit growth couldn’t be maintained neither will 0-1%. How long before we are back to the steady days of 5-6% growth is up for debate but what isn’t is the great returns available in this market.
As property prices corrected in 2008, rents continued to rise as normal, the result being great returns. Anyone now can buy a property with 5-7% returns so even with growth being minimal in the short term these returns still well outperform the banks.
At Rescue my Pension returns reach 7-10% sometimes more because we buy below market value!
What should you do?
Property will not continue to grow at these subdued levels for long and subsequently the returns will diminish as prices rise again. Don’t wait to be part of the herd, get your plans in place now, book an appointment with an Asset Manager to make sure you maximise your investment.