We all can admit, 2020 has been a strange year so far. The world as we knew it has been swept by the novel Coronavirus and consequently over half of the world have experienced some sort of quarantine regime. Many businesses were forced to close and furloughed their employees or lost their job completely. Unemployment records are at an all-time high and businesses have been forced to take grants and bounce back loans to stay alive.
But for property investors the question still stands:
Is 2020 still a good time to invest in property?
So, is 2020 still a good time to invest in property? If the music stops do the dancers stop dancing? Many would say "no" but some of the shrewdest and successful entrepreneurs and property investors would say "absolutely."
Let's take a step back a minute. Historically, property values have gone up 3.27% on average over the past 15+ years.
Inflation has averaged roughly 1% per year during the same period
The last time properties went down 2% 2009 and I'm guessing if you bought a property then you're probably sitting pretty by now.
Let's be honest, the future is a little uncertain, as always, but one thing for sure is people need somewhere to live. Also, many other conservative property investors are likely to be looking for liquidity now and willing to take a discount on the list price to get liquid.
Time to be greedy or fearful?
There was once a wise man who said: "be fearful when others are greedy and be greedy when others are fearful." That wise man was Warren Buffet, probably one of the greatest investors in our time. A prestige bank also thinks to be long-term greedy pays off and is OK.
Since COVID-19 got serious, the property market has taken a huge hit. Estate agents were banned from doing viewings. Homeowners had to do video tours to keep the potential buyers warm while observing social distancing. House moves are expected to be down roughly 40-50%.
It's a little early to tell but property prices are expected to fall 3% this year. The rent collection time is taken longer. Many lenders have pulled back from the market and/or decreased their loan to value (LTV).
I know, you're probably thinking "sounds good."
So, is this the time to be greedy? Are there deals out there to grab?
With the UK government bailing out everything from small businesses to the self-employed, the UK's borrowing has exploded. All of this money is required to keep the music going, albeit ever so faintly. So where will all of this money go?
During this social distancing period, people have been forced to use online shopping while working from home or being furloughed. This trend could continue after social distancing eases and then it could be an even tougher ride for the high street retailers (like it wasn't already).
Office based businesses have also tested the waters with remote working and could see this new approach to being a way to save costs. Rather then spending an arm and a leg on prime office space with free coffee and all the extras, companies may look to downsize their offices and promote flexi-working (e.g., 3 days in office per week).
That said, everybody still will need somewhere to live - that does not change. However, given the likelihood of more flexi or remote working, we could see that people may choose to live further out of town to get more for their money. With all this government spending propping up the economy, once things start turning back to normal we could start to see the next boom. This could be the reset you were waiting for.
We always recommend going in with a lower bid than the asking price. Perhaps 10-20% lower depending on the prices of comparable local properties. During these uncertain times, there are likely fewer buyers on the market ready to deploy their capital. There are also fewer lenders. We think this could be the time to do a little bargain hunting. Remember, a great deal of value can be created on the price you acquire the property.
Will you be investing in property this year? Is 2020 the year to be greedy?
Let us know what you think on Twitter.