In times of economic uncertainty, many people hesitate to invest in property. However, the current market conditions could be a hidden gem for savvy investors. Here's why taking advantage of this opportunity now could be a wise move.
The Perfect Time for Property Acquisition:
Investors with an eye for potential engage with developers during the construction phase, where properties are often available below market value.
This strategic move allows for significant savings as developers offer discounts to ensure early sales, which also helps them secure cost-effective bank financing.
Understanding Below-Market Value Sales:
Pre-sales allows developers to avoid expensive bridging loans, and developers share the resulting financial relief with investors.
Early sales give confidence among banks and leaders, streamlining funding for future projects and supporting the expansion of developers' businesses as banks are confident in the sales of the developer to pay back development finance.
A Closer Look at Interest Rates and Mortgage Costs:
The Bank of England (BoE), over the last two years, raised interest rates to control inflation. The bank has since increased the base rate to 5.25%. This monetary strategy is taking effect. Inflation is now down to 6%, having been over 11% this time last year.
As inflation approaches the 2% target, the BoE plans to adjust interest rates favourably, potentially reducing future mortgage costs and enhancing property values.
Off-Plan Purchases Offer Financial Breathing Room:
When investing in off-plan properties, mortgage concerns are postponed until construction is completed. With mortgage rates projected to drop to between 3-4% by 2026, this timing aligns perfectly with the completion of projects like Berkeley Square, promising to reduce mortgage costs and create a surge in demand, resulting in increased property prices.
How will falling interest rates impact UK property?
Property prices have already fallen 5.3% from their all-time high. This number hides the true magnitude of the price drop. With most goods and services rising by almost 15% in the past 18 months, the inflation-adjusted drop in property is already at 20%.
When interest rates return to 3-4%, the housing market will surge accordingly, clawing back losses in real terms.
The 2026 Forecast for the UK Property Market:
Most analysts anticipate lower interest rates by 2026 are expected to improve affordability, attracting a diverse pool of buyers.
This surge in demand is likely to drive property prices upwards as a critical housing shortage, coupled with slow construction rates, creates a supply shortage that is likely to push prices up, considering the government's struggle to meet its housing targets.
UK house prices rose by 1.1% in October, ending a six-month streak of monthly falling house prices, with the average property price now at £281,974.
Annually, property prices fell by 3.2%, but this is up from September's 4.5% decline.
A shortage of homes for sale and weak demand forced house prices up, according to Halifax. Despite the rise, it predicts that high interest rates and the high cost of living may delay house price growth until 2025.
Despite a nominal decline, the real-term impact of inflation suggests that property values need to recover by 20% to maintain the current standards.
This positions the market for a corrective upswing, providing investors with a golden opportunity to secure property at values poised to grow.