One of the reasons why I think the market will continue to strengthen is that credit is becoming more available for property investment.
Well the feeding frenzy the estate agents were hoping for still hasn’t materialised. Yes, there are more buyers in the market and confidence has certainly been restored to a degree. Indeed, transaction levels are beginning to creep up, but not to the extent that most commentators expected. So does the lack of a frenzy mean that we have seen the top of the market and that a crash is imminent?
Well there are certainly many possible triggers for a crash – seemingly high valuations, financial stress in the Eurozone, high levels of debt throughout the western world, bubbles forming in the Chinese stock market while their housing market looks suspect. I could go on!
But there is still a huge amount of money in the world and it is an undeniable fact that a significant percentage is targeted at London property and the UK in general. Does this mean that London property prices can only go up because of this significant investment by sovereign wealth funds, pension funds, the “super wealthy” and international and domestic investors?
Of course not. In fact I can guarantee you that the UK property market will crash again. I just believe that we are a number of years away from that happening unless there is another global financial crisis (although the authorities seem intent on printing money to prevent this happening. This again will work for now, but I can guarantee there will also be another global financial crisis because humans swing between fear and greed).
One of the reasons why I think the market will continue to strengthen is that credit is becoming more available for property investment. This may sound odd when one considers the strict rules for mortgage applications, but it is noticeable that the banks in America are already loosening their restrictions. This will continue and it will also happen in the UK. The margins on property lending are simply irresistible, so the rules will be relaxed.
Meanwhile, the growth of Air B’n’B and similar ways to increase revenue from rooms in one’s property will create extra income for those who wish to do so. Add to that a culture of fractional ownership and the face of property ownership will soon be transformed. For example:
“A Surrey home listed on a crowdfunding website has been snapped up in little over half-an-hour as appetite for buy-to-let properties shows no signs of abating. The £212,900 two-bedroom flat in Byfleet – a half-an-hour train ride into London Waterloo - was placed on the Property Partner platform at 3pm last Friday and by 3.35pm was fully funded.
A total of 126 investors clubbed together to buy the property, investing an average of £1,700 at a rate of £6,000 per minute. The crowdfunding website, launched earlier in the year, counts Ed Wray – co-founder of Betfair – as one of the backers."
This is only the tip of the iceberg in my opinion. As money pours in from the top of the market, those trying to get their foot on the housing ladder will find other ways to do so even if it means only part owning an investment property. This will drive the property market for years to come, but, as mentioned it will end with another crash, but we are some time away from that happening.