A Challenge Or An Opportunity?

We’ve been experiencing a sellers’ market for a while in the property market, but it’s about to tip the other way.

I’ve been in property for 40 years now and I’ve seen it switch many times, the vibrant sellers’ market that was in place before the first lockdown ratcheted up as the government introduced a stamp duty holiday and people forced to work at home started looking for a property that offered a better home-working space.  Landlords were outbid as prices soared, but then the high rate of inflation has kicked in and that’s pushed the ‘reverse’ button.

Now sites like Zoopla are reporting a significant drop in searches and estate agents are actively chasing new business instead of sitting behind their desks desperately trying to keep up with the demand for new homes.

The question is not ‘will it become a buyer’s market?’, but how extreme will it become?

The Challenge

For buy-to-let landlords the increasing interest rates are posing a problem.  The market won’t stand increases in rental that match the increases in interest rates, so that means that profits are being squeezed to their limits.

If you’ve got a fixed rate mortgage for another year at least, I’d recommend sitting tight as rates will come down eventually.  If they’re still not down when your fixed rate period ends, go for a variable until the rates begin to drop.  Short term pain for long term gain.

Interest rates are being jacked up by the Bank of England to deal with inflation, that will trigger a recession.  Eventually, they will need to stimulate the economy and that means cutting interest rates.  Currently we’re marching up a hill, but in a couple of years we’ll be marching back down.

The Opportunity

Smart investors will be looking for properties that are available below market value.  This is one of the skills I teach on my programmes – particularly how to find unmortgageable properties and get your investment out quickly by utilising intelligent financing.

The interest rates on bridging loans haven’t risen much at all and, currently, the gap between mortgage interest rates and bridging interest rates is narrower than I’ve ever seen it.  Mortgage rates are running around 6-8% and bridging rates are only 8-10%.

There will be massive opportunities for the smart property investor over the next 12-24 months.  In fact, some of my students started pulling cash out of their properties earlier this year to build a war chest that would allow them to take advantage of the opportunities on the horizon.

Apply Common Sense

Other property gurus advise stress testing your investments at a higher interest rate before making a commitment.  Even when interest rates were 2%, smart investors were running stress tests at 6% to ensure they didn’t end up getting caught out with unaffordable financial commitments.  If you haven’t done that before you may be facing a rocky year or two.

As one of the world's greatest investors – Warren Buffet – said:

"Only when the tide goes out 

do you discover who's been swimming naked."

Check out my YouTube Channel where I discuss other topics like this.

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