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Thoughts on upcoming boom/bust?


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I'm new to property hub and have been learning alot about the 18 yr property cycle. As I understand we have just come out of.a mid-cycle wobble. In this youtube https://www.youtube.com/watch?v=070uJ0IyAww  I listened to, it seems Rob & rob believe we are moving into a boom followed by a bust which pretty much lines up with the 18 yr property cycle. 

I wanted to ask your thoughts, do you think the bust will come sooner than usual because of COVID?

 

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There's a lot of things at play, making it more difficult to predict the cycle

1) last year, we had Brexit, which hasn't gone away we've just all stopped talking about it due to 2

2) Covid prevented moves happening, viewings, valuations etc. When that was relaxed, there was a lot of pent up demand causing a mini-boom. That's been accelerated by the stamp duty holiday

3) Hong Kong - there's a lot of money moving from there to the UK at the moment, mainly for city centre new builds, but keeping demand high. I think stamp duty for overseas buyers increases next year, which might soften that a bit although more likely that it'll only change if there is political change e.g. a softening in the issues with the Chinese government or a clamp down on overseas investment.

4) Covid again - as we head into autumn/winter, who knows what's coming. There's already a few local lockdowns which could start to impact viewings etc, especially if the property isn't empty, so we could see the market get stuck again before jumping forwards in Spring

5) Furlough - it's coming to an end soon, so then we'll see the real impact on the economy. If there's a leap in unemployment, sales could start to dry up and repossessions could be a short time away 

6) Eviction ban. That will need to be lifted soon and when it does, will we see some landlords selling up having got fed up with no rent etc? Could create an increase in supply

7) Brexit. It's starting to rise up the news agenda again, but something has to happen at the end of the year. We could leave with or without a deal and either could impact prices. Depending on your political view, you could take the view that it'll be a disaster for the economy or a brilliant thing, but feels like about 50% of the population will be nervous about whatever happens.

8) Trump. I wouldn't normally consider an American election to have a big impact, but it'll be 'interesting' to watch. If Boden wins, how do markets react? How does Trump react - if he decides it's a fake result, will he refuse to accept it etc? That all becomes an unknown, that markets don't like, causing share prices to fall. Not a big deal unless it causes a recession, which would spread beyond just America.

9) Stamp duty holiday - at some point, it gets lifted, which will have some impact. Will it cause a crash? Probably not, but it'll cause a slow down and the impact of that will depend on what else is happening.

 

So, in short, no idea, but will be interesting to watch. I think the thing to concentrate on is the cycle, don't think about the 18 year bit which is just an average. Watch out for the ther signals if your planning on a purchase to avoid the winner's curse phase.

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Impossible to say but I am on the side of caution and believe things will get worse before getting better - as others have said the next 9 months till April largely seem full of negative's. As much as I understand the 'be bold when others are fearful', I would rather wait a while and keep cash ready to invest around next spring

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Yeah it’s interesting..: I was thinking more that we’d see a dip at the end of stamp duty /furlough etc. But what it seems that rob and rob are saying is that we are entering into a boom phase in the next 12 months, 

and these phases last for a few years. So now is a good time to buy...


on the other hand if we are about to see a bust wouldn’t it mean we are now in the winners curse phase? Therefore meaning it’s a bad bad time to buy?

 

im just trying to figure out what to do! Wait or just go for it?!

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There will surely be less transactions in mid 2021. But prices should only fall if people NEED to sell. Unemployment might result in some hav8ng to sell and some first time buyers with 95% mortgages are going to get caught out in 2022. I think there has to be a dip. 

Usually a fall happens after a rise and we haven’t seen much growth in recent years so I anticipate a small fall. People don’t like to sell below the price they bought at so if they don’t need to move they will stay put. 

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  • 2 weeks later...

Who has been looking to invest in a BRR deal when buying now means buying high, but then by the time you come round to refinancing the house prices could have dropped. This is a bit of concern, if you're able to get purchase, renovations done and refinanced before any crash that would be ideal but when people are predicting Spring 2021, this doesn't leave much time to do such project.

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BTL is ok right now as its a long term investment and even 10-15% hit will be a blip in he long run. BRR does have some risk as you are looking at 9 months by the time you get a mortgage sorted so you may not get out as much as you would like. Flip is even riskier..

For anyone who's main business is property then i suspect they will carry on as-is - maybe with some caution. For others where property is 'on the side' and a long term investment with no urgency for income then waiting it out doesn't have much downside..

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We saw a slight increase in prices a few years ago, followed by a small dip then a recovery, which had us all thinking that was the mid-cycle wobble. There's still time left in this "18 year" cycle for a dip then a boom after. imo prices and demand have sored so much since lockdown it's not sustainable and I can't see prices rising like this until the end of the cycle. I wouldn't be surprised if we see a sharp dip during 2021 followed by a boom that will see us through to the end of the current cycle. So if anything I'm anticipating the crash to come later than expected.

So when we look back this will be the period of time we refer to as the mid-cycle wobble.

With everything that's going on, Trump, Brexit, stimulus to get us through Covid, I'm expecting a very big boom followed by a very big crash

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Not every 18 year period follows the norm.

The area we work in is currently booming with high demand chasing relatively low supply - post lockdown saw a huge number of marriage/couple breakups so the rental market went nuts as well.

Our opinion, for us anyway, is that now is the time to be fearful when others are greedy. With all that is going on, brexit, furlough ending, second wave already happening, we will look to move back into the market next year.

Having said that, it is only our opinion, and it is the difference of opinion that make horse races... 

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10 hours ago, dennis hughes said:

Not every 18 year period follows the norm.

The area we work in is currently booming with high demand chasing relatively low supply - post lockdown saw a huge number of marriage/couple breakups so the rental market went nuts as well.

Our opinion, for us anyway, is that now is the time to be fearful when others are greedy. With all that is going on, brexit, furlough ending, second wave already happening, we will look to move back into the market next year.

Having said that, it is only our opinion, and it is the difference of opinion that make horse races... 

Hi Dennis - what area is that? 

 

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  • 1 month later...

I spoke to a residential property valuer for a bank last week (in the Oxford area) who was of the opinion that post christmas he wouldn't be surprised to see prices drop by 15% or so, but that it's hard to make a call and can be very area specific depending on supply of housing stock...

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15% seems hard to believe noting how lively the market seems to be at the moment. However with everything on in the world at the moment nothing much would surprise me. I buy in Oxfordshire and my local market seems pretty hot.

David M Slater ACMA 

Accufy Accounting  - Proactive accounting for property investors 

0208 242 4926    info@accufy.uk

 

 

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I doubt it will be 15%. Obviously I'm guessing. Interest rates low, supply low, cash rich investors holding money and waiting, the govt intent on making sure people keep their homes (no repossessions), mortgages cheaper than renting (incentiving keeping the home) (a lot more than previously), maybe there will be more QE... I'd genuinely like to see how they come to it (15%), as in the science... theres obviously the worry over jobs...not sure that will outweigh the above... interesting though.

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On 9/17/2020 at 8:51 PM, gc said:

Who has been looking to invest in a BRR deal when buying now means buying high, but then by the time you come round to refinancing the house prices could have dropped. This is a bit of concern, if you're able to get purchase, renovations done and refinanced before any crash that would be ideal but when people are predicting Spring 2021, this doesn't leave much time to do such project.

This was my goal this year! To buy a property, add value and refinance to pull out some cash to invest in a BTL. Obviosuly now I'm not confident doing this and I'm thinking of waiting until spring time next year (or whenever prices start to drop) to buy something cheaper and then just wait until prices start to rise (who knows when that will be)

But my main concern is that if prices do crash and we have a bit of a wobble, will mortgages me hard to come by, so then I've waiting to buy but then can't?

It will be interesting to hear other peoples plans if they were hoping to go down the BRR route this year too!

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On 10/28/2020 at 7:59 AM, nataliej said:

This was my goal this year! To buy a property, add value and refinance to pull out some cash to invest in a BTL. Obviosuly now I'm not confident doing this and I'm thinking of waiting until spring time next year (or whenever prices start to drop) to buy something cheaper and then just wait until prices start to rise (who knows when that will be)

But my main concern is that if prices do crash and we have a bit of a wobble, will mortgages me hard to come by, so then I've waiting to buy but then can't?

It will be interesting to hear other peoples plans if they were hoping to go down the BRR route this year too!

I’m in the same boat! I’ve got this cash built up and ready to go but I’m worried it might crash and I’ll be stuck.... but when listening to the podcast rob and rob keep talking about a book before a crash....?

im just trying to decide whether to put the money in equities instead....

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I get it, but in depends on what you are looking at and what a growth your area is experiencing over the last few years. Personally I think we are in a bit of a unprecedented wobble, which when all this crap ends will be followed by a typical “thank god we’re alive”, “I still have a job” , “let’s buy buy buy” boom. Yeah if you bought now for 90k, it may go down by 9k, but if in 7 years is up 35% who cares and you would have netted a return in the meantime. 
 

pivot your strategy if needed. Or work out your purchase price based on what the market is projected at and work on that, make offers until you win in line with your strategy. Need to work for it, gone are the guys of buying cheap, refurb and rent and cashing in with just surfing Rightmove at the front end 

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