Have UK Property prices Peaked?
Property investors in the UK are sensitive to information regarding the rise or decline of prices in the housing market and to the risks or returns they might be liable to if they invest or have invested their money in property. From current signs and data, it would seem like prices in the UK have experienced a slow down as the housing sector has shown its first quarterly fall for the first time in 4 years. Does this mean that property prices have peaked? The last 4 years have been really good with the prices on the increase or steady. For the last few months however, these prices have experienced up to 0.2% lower rates in the months leading to April, according to Halifax data. They also fell 0.1% between March and April.
North – South Divide
What is interesting and noteworthy is that some areas have witnessed price reductions in their properties while prices in other areas remain on the increase. Property prices in the northern cities are soaring even though growth and purchase are decreasing in the southern regions. It raises the question as to why some areas have to reduce their prices drastically to get purchasers while other areas are experiencing gazumping and price increases. The high prices in many southern areas seem to be a reasonable cause for this, along with low yields, as shown by the decline in purchases. So, in answer to the question: have property prices peaked? The answer is probably yes in the south but no in the north.
There are still numerous high yielding, property hotspots to be found in the north of England for those willing to do some research.
Reduction in Properties for Sale
The Royal Institute of Chartered Surveyors have reported that the number of properties brought onto the market has drastically reduced for about thirteen months in a row. This makes the number of willing buyers much more than that of sellers probably creating the unstable demand and supply curve. The reality of the house prices falling in certain areas and in general is symptomatic of the current state of the real estate business in the UK. New data has however shown that the demand for houses in the UK seems to have been curbed due to the relentless increase on the prices between 2014 and 2016.
Slow-down the Government wanted
UK property prices seemed to be a stable and assured ground for investment, prior to a number of punitive measures targeting landlords that were introduced by the current government but it has been necessary for investors to re-evaluate the risks and opportunities that can be experienced with these recent developments and the market slow down.
The reality of house prices falling reduces the source of wealth for a lot of consumers in the economy. This could definitely have a negative effect on the economy as it is likely to stall growth. The importance of the housing market in the UK is undeniable and the effect will become evident as the time passes, clearly endangering investors’ opportunities as prices fall.
Investors could once again be trapped in negative equity although this is not what is happening at present. The Property Cycle dictates that there will always be periods of slow growth and occasionally price drops but as long as investors keep an eye on their portfolios and do not over borrow, most can weather any such storm.
The prices seem to favour foreign investors especially those who have their currency tied to US dollars. There has been a significant increase in the rate of foreign investors in the UK housing market from 2016 after the fall of the pound and the Brexit vote. Even now, these investors still seem to flock in as they take up interest in the more expensive areas that will guarantee significant capital growth for their investments.
While all the above information might seem like terrible news for those who own property already, it might just be the perfect time for investors who have been looking to join the housing market to invest but haven’t been able to afford to enter the market. This presents a special opportunity to allow for increased participation from more investors moving the market away from the property owners who seem to have had control of the sector. It is noteworthy that while property prices are falling in the UK, the index is still stable at 2.6% higher than this time last year. Those read like good numbers that could make investing the right move in this period.
Apparently, the shortage for properties on the market and cost of the available properties had allowed a lot of investors to lose interest in investment opportunities in this sector of the United Kingdom. As for the question have property prices peaked? The answer is probably yes and no. This price fall therefore seems to provide the right opportunity allowing for investors to watch this space and then re-enter the race and contribute to a balanced market for the property sector. Appropriate risk assessment will provide enough reassurance towards the idea of investing in the housing market bearing current prices in mind.