With a change of the UK’s leadership on the way, optimism is also creeping back into the property market. Express.co.uk reports research from the Royal Institution of Chartered Surveyors (RICS) suggests buyers are more upbeat on property prices generally, and there’s a likely rebound in London.
Brexit uncertainty has caused mayhem in politics, the economy and its depressed sectors like construction and property since news of the referendum results in 2016. There is only so much doom, and gloom tolerated, so news of real positive indicators in business and notably the property sector is enough to put the spring back everyone’s step.
Glasgow Fastest Growing House Prices
Scotland loves to beat England at everything, and like most countries, there is a rivalry between the cities. In Scotland, the competitiveness dates back centuries. Some 300 years ago it began over a loaf of bread! The standards of baking no less is where it all started, and today, there’s jostling for the top position in just about everything from business, to sport, music, you name it, so Glasgow topped the list of fastest growing house prices in the UK is a local celebration.
Known as the second city of Scotland in 2019 it has outdone English cities like Leicester and Liverpool which are the next best performers and Edinburgh coming in a clear fourth place.
London’s property prices have been in revere, i.e. going backwards, losing value for the past couple of years so while the UK’s number one city has a long way to go to get back on track with property price growth, a recovery of it’s property market is on the way.
The Property Cycle
The property market is cyclical and therefore, recurrent. Analysts can observe and predict when an area or country is moving from one phase to another, i.e. from boom to slump. Here is the layperson’s definition of its four phases:
The boom is the peak of the cycle, and it’s when property prices at their highest and it triggers more vendors (sellers) to sell up so to reap the rewards of achieving a higher sale price and thus more profit from the sale. This phase is known as a seller’s market and it’s when real estate agents are at their busiest. There are more sales transactions during the peak.
There is a correlation between the boom and the state of the economy. If one is doing well the other will do well too, and lower interest rates on loans result in homebuyers borrowing more, which fuels the property price growth and so on.
It’s not all positive in this phase, as the property price growth returns lower yields for landlords. They offset this outcome with raising rents, which in turn, impacts on the cash flow of the tenants. They are looking forward to the friendly times of the next phase in the property cycle – the slump.
The property prices growth slows and then plateaus, and it’s a buyer’s market. Vendors (sellers) now think twice about listing their properties for sale as they are unsure they’ll get their asking price. Resetting the expectations of sellers is the job of real estate agents and surveyors, and it’s tough for homeowners to accept their property is no longer worth thousands of pounds or dollars more than they can achieve now.
The slump is the phase that excites property investors as they know this downturn in the market may drop further and become a ‘bust’.
The bust phase does not occur in evert property cycle in all regions, and it can be passed altogether. However, this is the bottoming out of the property market where there’s a notable drop in sales activity, with sellers put off by the lower property values. In some areas, property values can drop dramatically in this phase and cause desperate homeowners with large mortgages to sell or foreclose, i.e. a mortgagee sale.
While some homeowners and investors may have overextended themselves and are forced to sell up, there are seasoned property investors more than one property cycle behind them that love this phase. These buyers are ‘cashed up’, i.e. they have enough equity in their existing property holdings for deposits on more home purchases. Buying homes often below their registered value provides instant equity, so this activity is rampant in this phase and the one that follows – the recovery.
Home sellers who have held on during the lowest point in the market now breathe a sigh of relief as they know property prices are rising. If they can hold on for a few more months before they sell, the boom will return.
Glaswegians are experiencing the good times of a boom phase, while Londoners are getting a sniff of a recovery. All property owners wherever they reside, i.e. USA, UK, Australia, and so on need to beware of market conditions when changing their position, i.e. selling, buying or refinancing. Success in property is not just luck; timing is everything!