SPECIAL FEATURE: Property investment, an honest insight – Fortem Property

Special Feature: Darren Bennett, Co-Founder at Fortem Property, has written an article on the subject of “Property investment, an honest insight”.

Fortem Property looks at the changing economy globally and what it might mean for property investment in general.

House Price Indices

The following organisations have produced house price indices in March (percentages refer to year-on-year growth):
  • Halifax +10.8%
  • Nationwide +14.3% (March)
  • ONS +9.6% (January)
  • Rightmove +10.4% (March)
  • Zoopla +8.1% (February)

These figures hint at a market that remains very robust. Prices are expected to moderate at some point in the year but that’s not yet happening on the ground. The Halifax data shows a month-on-month gain, up from +9.7% last month, and Nationwide puts the growth rate at an 18-year high, up from 12.6% last month. Zoopla’s HPI data shows a +0.3 percentage-point gain, up from January’s figure of +7.8%. Rightmove’s figures are also up by +1.7% month-on-month; a gain that is equivalent to +£5,760. Only the ONS figures (which tend to lag the others) show a slight slowing – from 10% in December to +9.6% in January.

Many commentators foresee a slowing of price growth in the coming months. Earlier this month, Zoopla noted that “the continued buoyancy of the housing market is a little surprising, given the mounting pressure on household budgets from rising inflation, which reached a 30-year high of 5.5% in January, and since borrowing costs have started to move up from all-time lows in recent months.”

Halifax concurs. It writes that the war in Ukraine, rising inflation, and higher mortgage costs “are likely to weigh on buyer demand as the year progresses, with market activity likely to return to more normal levels and an easing of house price growth to be expected.”

For now, though, Halifax believes that the “resilience which has typified the market throughout the pandemic shows little sign of easing.” As ever, this underlying optimism is largely attributable to market demand is much higher than the stock of available homes for sale.

In the notes published with its house price index, Rightmove observes: “We enter the spring selling season with the biggest mismatch between supply and demand for this time of year ever measured by Rightmove, with more than twice as many buyers as sellers.”

In a similar vein, Zoopla notes that “Buyer demand remains unseasonably high, with demand for family houses more than twice as high as usual for Q1… The rise in new supply has not been enough to offset high levels of activity, so total stock levels remain constrained, which has continued to put upwards pressure on pricing.”

Regional Patterns

The Halifax HPI estimates the price of the average UK home at £278,123, which is the result of the biggest annual cash-terms gains in the entire history of its index. However, it also points out that gains have been unequally spread across the country.

Its top 3 markets for growth include:
  1. Wales +13.8%
  2. Southwest +13.4%
  3. Northern Ireland +13.1%

At the other end of the table, London produced the weakest annual growth: +5.4%.

At a regional level, Zoopla now lists the top 5 regional markets for price growth as Wales (+11.8%), the Southwest (+10.1%), the East Midlands and the North West (both +9.6%) and Northern Ireland (+9.0%).

Its top-performing cities were:
  1. Liverpool +10.3%
  2. Nottingham +9.5%
  3. Manchester +9.2%
  4. Leicester +8.8%
  5. Bournemouth +8.7%
  6. Sheffield +8.7%
Rightmove’s regional table-leaders are:
  1. South West +14.5%
  2. Wales +14.4%
  3. East Midlands +13.3%
  4. South East +12.6%
Darren Bennett, Co-Founder at Fortem Property, summarises:

“House price inflation is currently exceptionally high, and the property market seems to be breaking records on an almost weekly basis. There are several reasons for this besides the huge disparity between supply and demand.

For example, despite high infection rates, Covid is no longer perceived to be the killer that it once was, and there is some sense of having come through the worst of it; restrictions have eased and much of the market activity that had been put on hold now seems to be resuming over the course of a very busy spring.

“Rising interest costs are also contributing to a sense of urgency; the feeling that mortgage repayment costs will continue to rise so now is the time to be buying property and locking into a lower fixed-rate deal. Again, this is prompting a surge of activity.

Rising transaction numbers often go together with fast-rising values and, if the surge begins to abate, it’s possible that price growth will slow too. Values should continue to rise – the strength of market demand makes that almost inevitable – but at a slower rate than before.

“Rising living costs, higher taxes and broader uncertainty over international tensions should all gradually erode buyer sentiment and bring price growth more in line with long-term averages.

“Nevertheless, current evidence suggests that investors are still operating in a favourable market. Unlike stocks and shares, which can be especially volatile at times of political crisis, property is underpinned by an inescapable need for living space, so it will always tend to be a resilient asset class.”

 

SPECIAL FEATURE: Property investment, an honest insight - Fortem Property

Written by Darren Bennett, Co-Founder at Fortem Property.

 

Kindly shared by Fortem Property

Main photo courtesy of Pixabay