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Tea Leaves and Tarot Cards: Property is Proving the Scaremongers Wrong

Tarot Cards on a Table

Welcome my favourite #Storetroopers!

Come into my parlour, cross my palm with silver and I will tell you the future. If only it were that simple, but no one really knows what is going to happen to the UK property market from one month to the next. It is a fickle taskmaster. In the whirlwind of predictions and forecasts for instance, the anticipated property crash of 2022/23 in the UK seemingly skirted around the doomsday scenario many scaremongers were touting.


Instead, the market has shown resilience and stability, much to the surprise of those waiting on the side-lines for a dramatic dip. This narrative of stability over sensationalism underpins the enduring appeal of the housing market as a cornerstone for investors looking to solidify their portfolios in uncertain times. For those investors who ignored the doom and gloom squad, they have been making a steady return on their investments over the last two years.


Let’s take a step back and investigate the happenings of 2022. Despite a flurry of speculation about impending downturns, the property market in the UK experienced record price growth. However, it’s true that as the year progressed, this momentum cooled, leading to a modest drop in prices across the UK. But why? Well, there were several interconnected factors at play really.


Ups and Downs:

The UK faced economic fluctuations, including rising costs of living which made the Bank of England increase interest rates. These interest rate hikes impacted affordability for potential homebuyers, making borrowing more expensive and cooling demand for property.


Market Correction:

The property market had seen a rapid increase in prices in 2022, driven by high demand during the pandemic and incentives like the stamp duty holiday. After such a burst of growth, it was natural for the market to slow down a bit and for prices to adjust back towards more normal levels.


Mortgage Rates Uncertainty:

After the mini-budget announcement in September 2022, mortgage rates shot up quickly. This sudden rise contributed significantly to the cooling of the market as potential buyers became more cautious in the face of uncertainty regarding borrowing costs​.


Supply and Demand:

By the end of 2023, the number of houses for sale went back to levels seen before the pandemic, but fewer people were looking to buy. This mismatch led to lower prices as sellers had to find way to compete more for buyers.


Local Market Differences:

The economic conditions and therefore the housing market trends varied across the UK. Some areas saw bigger price drops than others, reflecting the localised nature of property demand and supply, the job market, and overall consumer confidence.


Buyer Caution:

Consumer confidence plays a crucial role in the property market, influencing both demand and pricing as buyers are more cautious, which in turn influenced the property market dynamics​. People were less eager to make big purchases like houses because they were unsure about the future. Well, if they’d let me read their tea leaves, I would have been able to tell them!


Now, let’s look at the close of 2023 especially for those who held their nerve by either holding onto their properties or ignored the scaremongers and bough anyway. As we now know the market began showing signs of recovery, with Nationwide reporting a 0.2% increase in November - marking the third consecutive monthly rise.


Secondly, continued demand for properties underscores the market’s stability with the latest figures from the Bank of England showing a noticeable boost in the number of mortgage approvals this January, with 55,227 recorded. This represents a 7.2% increase from the previous month's total of 51,506, and a significant 40.2% leap from the same month last year, which had 39,382 approvals. Figures are boring, I know, but this is the only way I can show you how confidence is growing.


What about the rental sector, the one we are all really interested in. The UK experienced significant growth in 2023 according to, “Private rental prices paid by tenants in the UK increased by 5.1% in the 12 months to June 2023, representing the largest annual percentage change since this UK data series began in January 2016” showing a sustained demand for rentals.


Now let me gaze into my crystal ball to see what’s on the horizon for 2024. It’s looking good as the UK property market is poised for stability, buoyed by the government's strides in halving inflation and a gradual easing of mortgage rates from their peak. There might be some regional variations and continued adjustments in pricing, the overarching tale is one of resilience and slow but steady recovery. Just what us investors need.


Alert: Numbers warning coming up - The latest data form the Nationwide House Price Index further reinforces this trend of recovery and stability. February 2024 reported a 0.7% increase compared to the previous month, with an annual change standing at 1.2%. Evidence that contradicts the scaremongering narratives and highlights the unwavering appeal of property investment in the UK.


There you have it, it seems clear the UK property market will have its ups and downs, but overall, it maintains stability and growth potential. Despite the challenges and uncertainties that have arisen, particularly in the wake of the pandemic and economic shifts, the market's foundational strength and the enduring appeal of property investment for ROI are unmistakable. It lends credence to the adage, "Don't wait to buy property, buy property and wait," (Christopher Watkin). Underscoring UK’s property reputation as a prudent and potentially lucrative investment avenue.


Until next time, keep your investment compass steady and your dreams of property prosperity alive!


The Anonymous Investor.

*This blog post is for general information only and is not financial advice. Always speak to a financial advisor for guidance on your specific situation.


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