Property market conditions - have we seen this before?
What do you need to know about the property market?
As a nation, we absolutely love to talk about the property market.
It's the second thing we talk about, after the weather, in the UK.
For many, searching for a property is a hobby, not a serious pastime. The majority of people that spend time looking online at the properties available on the market have no intention of moving; they are nosy. It's like a reality TV show.
"Oh, that one's gone up for sale. Did you see the price?" or, "they've sold number 4. I wonder what they got for it."
Nosy neighbours, gossip, and a teeny weeny thought that if they got that price for theirs, our house is probably worth a bit more.
We're obsessed.
On a slow news day, the press knows that people will pay attention as soon as they mention the property market. They report that we're in a rising market one minute, then a crash the next.
As soon as it appears that the prices have begun to increase, they jump on it. Endless reports, graphs, and interviews with property sellers about how much they sold their homes.
It creates a frenzy. Viewers on the fence about moving are suddenly jumping into action because they don't want to be priced out of the market and unable to afford the home they want.
On the flip side, if things are slowing down ever so slightly, which they do for various reasons, the press is there, with their reports again that a market crash is coming.
Suddenly buyers are worried that they might be paying too much. They begin to either reduce their offers or withdraw from the sale while watching the market play out.
The truth is that we haven't got a crystal ball. We can never predict exactly what is going to happen.
Who would've thought we would experience the pandemic in 2020, which would spark rising inflation and an astronomical rise in house prices? No one. During the lockdown, almost all banks and economy people estimated that the housing market would drop drastically. The quoted figures were anywhere between a 5% and a 40% reduction.
But that just didn't happen.
As soon as the lockdown was lifted, estate agency was one of the first industries to return to work.
And people had been stuck inside for 3 months, looking at the same 4 walls. They'd had time to think about their own future, and that time perhaps pushed them towards moving house a few years before they would have otherwise.
But, this is not something we haven't seen before.
The housing market changes. There are trends; sometimes it's going up, and sometimes it's coming down, but it is almost always moving.
In fact, studies have shown that the housing market is on a cycle of 18 years. Meaning that every 18 years, we have a bust, followed by a steady growth culminating in a boom. And what goes up must come down. So there is another bust that takes roughly 18 years to recover from.
And this has been the case every 18 years, for multiple cycles.
Of course, no one predicted the pandemic, but we are due for a boom. After all, it's been 14 years since the last bust.
If this theory is correct, we would have seen a growing market anyway, pandemic or no pandemic.
For those of us that can remember 2008 vividly, or perhaps even the recession before, it came after a long period of positivity.
Increased GDP, happy people, lots of spare cash and spending in the economy.
Loans were easy for most people to get, so they had lots of money to do the things they wanted. Go on holiday, buy a car, move to a bigger, more expensive house.
It wasn't until that good living had pushed the credit to its limit that things started to fall apart. And, if the cycle is to be followed, we have another 4 years before things go south.
Of course, this is a hypothesis, not a fact. And this market is different to any that has come before. But there are clues.
Hopefully, a correction rather than a recession.
Suppose 'spare' money is less available. The average person's debt will increase as they use credit to supplement living expenses and try to stretch salaries.
This will have an effect on property prices, which will reduce again. Resettling until the cycle repeats again in another 18 years or so, when they will have increased again.
So, if we have 4 more years of 'good' market before things go awry, you can move, extend, or whatever you have been putting on hold. There is time.
Make hay while the sun shines, and get your home on the market if that is something you have been thinking of. Give us a call.