Are you trying to buy property at the moment? It probably feels a little like wading through treacle, doesn’t it? Hopefully this article will give some context, apply some reasoning, and suggest a couple of ways forward while the buying mania is in full swing.
Firstly, to put it into context. A caveat - all ‘year-on-year’ (data) figures at this time are about as unhelpful as they could ever be. I am always suspicious - after all, a year is a somewhat arbitrary construct - and never is that better proven by the existence of ‘Covid-19’, which was realistically one day away from being called ‘Covid-20’ as it was classified on New Year’s Eve! But at this time, the year-on-year statistics are clouded by falsehoods - lockdowns, market shutdowns, furlough, new laws, new customs and practices enforced almost overnight. Still - we come into May 2021 on the back of a month that saw Rightmove asking prices at a fresh all-time high, that saw prices creep up 2.1% according to Nationwide, and on the back of a year like 2020, which the ONS has recorded an 8.5% annual increase in the property market.
To add to these wider figures - there is a feeling on the ground of ‘mania’. The best proxy in recent times would be those who experienced the London market in and around 2014-15. Sealed bids were commonplace. In the years leading up to that quite manic period, prices were up by 12%, 16%, 20%, and 25% in some boroughs. In the cold light of day, removed from the situation, and being dispassionate by nature when it comes to facts and figures, it was easy to see that this ‘melt-up’ (as the traders would say) would not and could not last. However, it was incredibly difficult to persuade people to see differently. I remember some conversations in late 2016 - even when we had had a) evidence of a peak in January b) a Brexit referendum with a surprise result and c) the election of a surprise leader of the free world (Trump), and it was STILL difficult to persuade people that London was unlikely to provide similar returns over the next five years as it had done in the previous five years. We now see the statistical evidence for that period and it just looks so obvious in the cold light of day - but the skill is removing oneself from the situation, not being emotionally invested, and acting according to the trends, facts, figures and fundamentals.
There is also one of my absolute favourite phrases that needs to see the light of day here. “The market can stay irrational longer than you can stay solvent” - John Maynard Keynes. Never is it so relevant as in a significant lurch upwards or downwards in prices. Calling the ‘top’ here would be a fools errand, and I will not attempt to do so. Covid has distorted so many markets and made double digit differences to figures that, in any normal time, we would see a few percentage points as being a really significant move. This is where volatility likely strikes.
Recent figures released by Zoopla showed a 27% increase in demand for houses so far in 2021. This is the first part of the conundrum. Why? I would suggest - firstly, people have more motivation to move than ever. Potentially permanent life changes when so much of life revolves around work, and so many people work in offices in city centres. Suburban arbitrage - the tradeoff between a longer train journey but fewer times per week, for a garden and cheaper pricing per sq ft (rent or buy) looks like a no-brainer right now - without even considering the number of issues that flats are facing (EWS1, anyone?). Also – many people now have more means thanks to grants, furlough, and enforced massive savings ratios because very few spending outlets other than Amazon and Netflix were open last year.