New scares over shares make property look safer
The chancellor has warned that the global economy faces its most dangerous time since the 2008 crash, but what does that mean for the property market? Sharon Dale reports.
GLOBAL economic jitters and stock market volatility have induced mild panic among property owners and investors.
Yet the share index losses could produce gains for British bricks and mortar, which is now being seen as a safe haven.
Graham Bates, a successful property investor and director of Residential Property Solutions at Leeds-based Eddisons, says: “What we’ve seen happening in the financial markets recently simply highlights the relative stability of bricks and mortar investment. Yes we’ve seen a bad downturn in the value of residential property assets and a shaky recovery, but the falls are not as quick or sharp as many equity investments.
“History also shows us that we will get past this. The fact is that people need homes and whether for owner-occupiers or investors supporting the private rental sector, residential property will remain in demand. What’s more, despite declining values, income from investment property has strengthened as a whole generation of people now prepare to rent rather than buy.”
As for where investors should put their money, he says: “In Yorkshire, as with all areas of the country, there are pockets of areas that have and will continue to outperform. In boom times, the old adage about ‘location’ being the number one factor was forgotten as developers built almost anywhere to fulfil the demand from buyers who lost sight of what really made sense.
“Today, it is very much about location. Aside from Yorkshire’s golden triangle, it is busy, good quality suburbs with great schools and transport links that should perform well, along with prime city centre locations where rental demand will remain strong for ever more.”
Andrew Wells, partner at auctioneers and valuers Allsop, agrees that buy-to-let is looking very attractive:
“The rental market remains a bright light in an otherwise fairly gloomy market. Tenant demand and improved availability of buyto-let mortgages is stimulating more investment buying activity.
“The gap between rental yields and deposit rates is certainly attractive and with volatile stock and currency markets, bricks and mortar as an investment class is coming into its own once again.
“At auction we are seeing strong bidding and some price inflation for good, well-let properties where consistent tenant demand can be predicted – these include better quality city centre flats, student houses and good houses suitable for professional lets or sharers.”
However increased investor interest doesn’t mean that sellers can sit on their laurels.
“Quality, price, location and presentation are still the principal drivers to a successful sale. Some parts of west Sheffield, north Leeds, Harrogate, York and Ilkley for example find buyers fairly readily if those four elements are in place,” says Andrew.
“Regrettably there are still too many sellers hanging onto unrealistic price levels in other parts of Yorkshire and have little hope of achieving a sale. I was on holiday in Wales last week and saw an estate agent’s advert in a local paper – it was refreshing in its candour. The agent made a public statement that no properties would be taken on by them unless the seller accepted the agent’s advice on asking price. I’m surprised more Yorkshire agents aren’t similarly straight-talking.”
Property portal Rightmove, which has just reported a 2.1 per cent fall in new sellers asking prices, says there is evidence that that housing market positives have found an uneasy balance with percieved risk, which may well insulate it from major price falls.
Miles Shipside, director of Rightmove says: “While the repeated shocks to the financial system have severely limited transaction numbers compared to pre-credit-crunch levels, the last four years have seen them stabilise, with an uneasy balance developing between those that have a pressing need to sell and those with a good reason and the capability to buy. In spite of the continuing global economic unrest, the UK housing market has several unique factors that should help to insulate it.”
These include relatively stable prices, low interest rates and a housing shortage.
Mr Shipside adds: “The UK does not have the chronic over-supply of property seen in many other countries. Demand for housing is high due to demographic changes, including net immigration boosting household numbers. These factors give our housing market more balance and stability, but perversely prevent a possibly quicker but more painful route to recovery via lower prices with higher transaction volumes.”
Suren Thiru, housing economist for Halifax believes the British economy is slowly improving and expects house prices to remain stable this year and next and Andrew Wells agrees: “It is difficult to see where house price inflation will come from in the next two years. We may need to be content with stable, level prices.”
TIME AND TIDE: The house boasts panoramic views of Sandsend and the sea from a canopied balcony. It is a rare new-build in the sought-after village, near Whitby, and was built over the last two years by owner Mike Forster, a chartered building surveyor.
GLOOM: Chancellor George Osborne delivers a warning about the global economy. Now houses are looking a safer investment than equities.