Property investment strategies in changing market conditions
KEY POINTS
- When the supply of houses is low, but demand is high, it is a seller’s market
- When there is a high supply of houses but low demand for them, it’s a buyer’s market
- The currently weak pound presents opportunities to overseas buyers
- British banks and building societies expect to lend 23% less to homebuyers
We share the difference between a buyer’s and seller’s market, examine the success strategies used by property investors in each market, and see where the market will be in 2023.
Understanding the Buyer’s Market
A buyer’s market happens when house supply outstrips demand. An influx of houses on the market can be due to higher interest rates, economic slowdown, or a race to beat upcoming legislation – as we saw with the stamp duty holiday in 2020.
Transacting in a buyer’s market does present opportunities. With more properties on the market than buyers, those looking to purchase can negotiate better deals and take their time making decisions.
For those selling property in this climate, it’s sensible to appoint a trusted agent who has excellent negotiation skills, proven marketing strategies, and can accurately value the property. These attributes can counter the downward pressure on prices, improving returns on property investments even in this market.
Understanding the Seller’s Market
In a seller’s market, there are more buyers than houses. When interest rates are low, and sometimes as new government schemes launch, the number of prospective buyers can increase. Still, property volumes don’t always match up: this imbalance can drive prices up, with significant regional variations that only local experts can identify.
But even in this climate, the savvy investor can find advantages, whether buying or selling. As house prices rise with demand and buyers make quick decisions leading to a faster turnaround time, it becomes an ideal position for a property investor or owner looking to sell.
It’s competitive, but Investors in this market can gain the edge over other buyers by employing some specific approaches: perhaps looking for properties on the lower end of the budget to allow for negotiations, ensuring finances for the property purchase are all in place to offer a faster transaction; or selling in a region with rising prices to invest in a region where the seller’s market is yet to reach.
The Market Outlook for 2023
At the time of writing, the Bank of England had just increased the base rate for the 10th consecutive time to 4%. Economists suggest that we are nearing a moment of stabilisation, with the biggest interest rate hikes behind us, and the rapid growth of inflation already slowing.
While 2022 was characterised by a reluctance on the part of lenders, with British banks and building societies expecting to lend 23% less to homebuyers, the outlook for 2023 is changing. We are seeing mortgage fixed rates reduce, with new 5 and 10 year rates below 4%. This is causing some lenders to chase market share, reducing rates and creating a competitive market – new buyers and renewing borrowers are in a better position than they were just three months ago.
The outlook for London properties remains favourable for buyers. During the third quarter of 2022, new instructions were up 8% compared to the same quarter in 2021. And good news for sellers, too – there was a 2.3% rise in prices compared to 2021.
LonRes reports that some buyers and sellers are waiting for a new phase, and the positive signs are there that this stable economic outlook is emerging. For some international buyers, however, the pound’s current position is offering some immediate opportunities. Dollar-based buyers in particular are taking advantage of the markets, as we have seen. As part of the global Berkshire Hathaway property family, we’ve been speaking with buyers from all over the world, and helping international clients find the right London property.
Conclusion
Despite predictions of a drop in property prices and people waiting for the market to turn, the property market remains buoyant. While the dollar value remains high against the pound, international buyers are already seeking and finding some excellent opportunities; locally, we are seeing signs that a stabilisation is on the horizon. For seller and buyers, this is still a time for locating the right property: with the best advice, planning and valuation, the opportunity exists.
