A Stamp Duty Free-for-All, BUY NOW!?
Well if there is one bit of good news that came out of this Covid-19 Pandemic it's the sheer amount of help displayed from the government to assist those in need. We all know by now the extent of the grants and breaks for most of those in the economy, now the housing market needs a push.
Estate agents are rejoicing in easy sales now as with the axe of stamp duty up to £500,000 it certainly means a considerable cash discount on purchasing a (next) home. Imagine not having to fork out with the £15,000 required on a £500,000 purchase price certainly makes a considerable difference!
And for investors?
Sadly the 3% surcharge still remains... However there's still savings to be had of course, on £500,000 we are also saving that £15,000, so still less money to park in the "deal" upfront. This can only be a good thing.
Well the key question is of course, how long will this last? At the moment details such as that remain unclear, so should we all rush to buy now? We certainly saw a big rush to complete when the surcharge came in to effect in 2016, so much so that we saw a real boom-bust scenario, artificially inflating prices even. This leads me right into my next point of discussion...
I think investors are no different to normal folk that rush into something when they see a bargain, or the end of a sale. We saw this in March 2016 as prices really peaked and then in April they started to fall heavily (transactions fell and hence prices, because people were factoring in the extra stamp duty in their offers, effectively lowering the purchase price to compensate them. Sellers suffered short term. It picked up again of course as we got used to the "new normal" but there was certainly a stall in the market at the time, I remember it well! That, and the B..... announcement of course!
By now, you should realise that I'm sceptical of the current market. I feel that rushing into a deal with an aim to resell the end product could leave you stuck with it. I think that we haven't seen the full effect of the economy shrinking 20% as yet. Companies are still paying furlough wages because they can claim it back from the government. Once the handouts stop will those people still be required? The demand for the product or service their company offers may have shrunk to such an extent that the headcount can be reduced. Keep someone on or simply offer them redundancy? It will take some time to build up to the size they (the company) were before the pandemic for sure. People in the leisure and tourism industry have suffered first and foremost and we'll see more sectors follow suit for sure! So good time to buy? Not sure is my answer. I think prices are inflated currently - we're still seeing amazingly good results in auction houses and I question as to why... When probing other colleagues they think it's because money is cheap and houses are certain. They are certainly less liquid than other investments me thinks, and because of the high transaction costs relative to other forms of investment I'm wagering that people are in it for the longer term. Park the money and sit it out. A new breed of investors, simply looking for a 5% yield and being happy with that for the next decade... I'm not sure that's the way to go, and as you know I'm heavily invested in property!
Do stay tuned for property investment tips/tricks and updates and by all means do check out the DownToSouthLondon YouTube Channel for entertaining and informative videos to help you invest with confidence! I also offer coaching on a one-to-one basis so if you are looking to get into property investing and require personal guidance then head on over to www.jeroenhoppe.com.