Is now a good time to invest in property?

When it comes to property investment, timing is key.

They say an Englishman’s home is his castle, and certainly we are a nation that likes to own property, both as a home and as an investment. Stock market volatility and dropping income in recent months has made some people wonder whether there is more stability in investing in bricks and mortar than in other assets, but is now a good time to buy?

The property market today

Despite gloomy economic prospects, the housing market has defied all expectations in recent months. According to one of the leading indices for property, the Halifax House Price Survey, house prices in September were 7.3 per cent higher than they were in the same month of 2019, which is the strongest growth since June 2016.1 

Russell Galley, Halifax’s managing director, believes there are a several reasons for this - the first being that many of us have become dissatisfied with our spaces over lockdown, seeking home offices and gardens in the country rather than smaller flats.

“There has been a fundamental shift in demand from buyers brought about by the structural effects of increased home working and a desire for more space,” he says.

There is also the effect of governmental measures aimed at minimising poor economic outcomes from COVID-19, including ultra-low interest rates. While the Bank of England rate is at a record low,2 that doesn’t mean there are brilliant mortgage deals to be had - the latest Moneyfacts UK  Mortgage Trends Treasury Report shows that average mortgage rates are climbing and fewer products are available, except for those able to put down larger deposits.3 

As well as low rates for some buyers, there’s evidence that the recently announced stamp duty holiday may be driving up prices. The government announced in July  that there would be no stamp duty to pay up to £500,000 by those buying residential property until March 31, while those buying buy-to-let property need only pay the 3 per cent stamp duty surcharge up to this level, representing a considerable saving.

What happens next?

Stamp duty and low rates represent two good reasons to invest right now, but there are downsides too. Some experts are concerned that while property is in demand now, with tougher economic times on the way, the current mini housing boom cannot last. Forecasts from economic thinktank the CEBR (Centre for Economics and Business Research) suggested that house prices could fall by almost 14 per cent in 20214, once the effects of the stamp duty holiday wear off and more difficult economic times start to kick in.

For would-be investors, there are other concerns to take into account as well as the state of the market. Property is a good provider of regular income, but it is illiquid, meaning that it can be difficult to get your investment back again quickly if needed. If you are planning to rent out a house or flat you must also plan for void periods, maintenance and other issues to crop up along the way.

A financial adviser should be able to help you decide whether property is the right investment for you, perhaps as part of a persified investment portfolio.