Why are property prices still going up?
It’s already common to hear people saying that property prices have drastically gone down, and logically, if you think about it - it makes sense, sort of. And it’s this assumption that we’ve decided to tackle and break down for you.
An article from CNBC, released on Monday, shed some light on why the UK’s property prices have continuously gone up, in fact, they recorded their biggest growth since the end of 2016. In any case, the two ends of the stick represent two very strong extremes that undeniably are the basis of price fluctuation – one being the current pandemic and amounting for an enormous threat for the real estate market; the other one being the never ending growth of the population and the increasing saturation of real estate in big cities and close peripheries.
The overall purchasing power of the world population keeps on growing. Since we live the effects of globalization, Portugal’s big cities still amount for cheaper cost of living than other European capitals. Moreover, the Portuguese government is promoting easier access to big cities – allied with the possibility of families being able to work some days at home and at the office. This will undeniably foment the search for housing in the peripheries of the big cities, resulting in a better overall quality of life.
«The Halifax House Price Index, which is run by analysis company IHS Markit, found that U.K. house prices grew by 5.2% in August compared to the same month last year. It marks the strongest annual growth in prices since the end of 2016.
The price of the average U.K. house hit £245,747 ($324,241) – the first time on record that prices have surpassed £245,000. It represents month-on-month growth of 1.6% from July to August, a touch higher than the 1.5% growth forecasted by economists in a Reuters poll.
Russell Galley, managing director at Halifax, said the surge in property market activity had driven up house prices as coronavirus lockdown measures eased in the summer months. This had been “fueled by the release of pent-up demand, a strong desire amongst some buyers to move to bigger properties, and of course the temporary cut to stamp duty,” he said in a statement.
In July, U.K. Finance Minister Rishi Sunak announced a holiday from property tax, known as stamp duty, on properties worth up to £500,000 in an attempt to stimulate the housing market.»
However, Galley added that the current numbers were not a stable confirmation of the current market panorama. Despite the encouraging numbers displayed in the 2nd and 3rd quarters of 2020, the Halifax’s Director claims that it is still soon to pinpoint exactly how the market will behave when the dust settles. In any case, we have yet to see the real consequences of the economic shutdown.
Upon the uncertainties of the market, one can only speculate how demand will be impacted by the current conjecture. These speculations are, interestingly, very optimistic. At TOTE SER, we can admit that between the last of Q1 and throughout Q2 there has been some hesitation regarding property acquisitions, solely because of the speculative prices. However, the demand for house acquisition by the end of quarantine has skyrocketed. This is due to many factors, these being the increasing number of divorces, the re-opening of borders, enabling tourists to come back to Portugal, and the opportunity factor (people who wanted to benefit from the market downfall to acquire property at much cheaper prices).
Now if you ask us, did Covid-19 result into an immense shakedown of real estate as we know it? Honestly, not really. The characteristic stability of this type of market defies all of the odds, and nowadays it has become such a well cemented field that even the most serious external factors do not seem to shake up the industry ever so slightly. It can change trends, but the numbers hardly every move.
This is why we firmly believe that now is the time to get the most out of your buck. We wouldn’t be saying this if we were new to real estate, or even economic crisis, no. We have 30 years of experience, worked through several market crashes, managed and grew our investors’ portfolio in the harshest conditions, and became a staple in the Portuguese real estate market.
From every obstacle, we turn it into a virtue. This is why we are "the marksmen of asset management."