The media may be negative on the UK housing market but when it comes to the UK, owning a property is more positive than it may seem.
The Negative Narrative – First Time Buyers
The narrative we hear around the housing market is of an investing context. This consists of forecasts that are a couple of years in advance which is why there is more negative sentiment than current prices are reflecting.
The first element of forecast is future affordability – house prices being too high for first time buyers with increasing inflation lessening their chances of purchase.
The second is first time buyers priced out of obtaining a mortgage. In 2021 it was possible to obtain a 1% fixed mortgage. Now you’re looking at 5% which will likely increase as the BoE continues to raise rates into 2023.
This may seem bad news on surface but it only equates to a few cancellations from buyers in the UK that new housebuilders are reporting.
The Medium Narrative – Existing Owners
Many people are coming off fixed rate mortgages next year and will see an increase in their repayments. Some people with buy to let properties may sell due to this and the capital gains tax tightening and potential council tax increase authority that was given to local councils in the recent Autumn statement.
However the increase in mortgage payments isn’t going to be an en-mass problem as in 2008 because most property owners today are older, wiser professional people with sensible mortgages, savings and plenty of equity in their homes.
The Positive Narrative – Wealthy Foreign Investors
The negative media narrative we hear is as mentioned a subjective two year in advance forecast and it doesn’t reflect the current situation as much as it should.
The media will likely manage to push house prices down a little next year with their usual spin but this is seen also as a buying opportunity for long term investors which will keep prices from significant decline.
Also with the rest of the world seeming a little more unstable. Wealthy investors in other countries see the UK as having the most legitimate legal system in the world. They understand one of the best places to park their money is in a country least likely to take it from them.
They also understand that property is a tangible asset that increases in value long term which can even produce a consistent dividend if the property is rented out.
In Summary
The media may be talking about a lack of affordability for UK first time buyers. A few existing owners keeping up with the Joneses with no equity may lose their property. A few buy-to-let owners may decide to pull in the reins and put their investment property up for sale.
In reality though, for the majority, UK property is seen by the rest of the world’s wealthy as one of the most stable places to hold and invest their money. For that reason the UK property market may see a slight pull back next year – but it is still one of the most in-demand assets you can own. It will always continue to increase in value long term and if a buy-to-let, it will likely produce a consistent dividend along the way too.
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This article is for informational purpose only. It does not constitute finacial, tax or legal advice, nor is it a recommendation to buy, sell or hold any investment. Past performance is not a guide to the future, investments rise and fall so investors could make a loss. No view is given on the present, future value or price of any investment and investors should form their own view on any proposed investment.