2020 is a bumpy year for the UK. The year started with uncertainty on many aspects to continue with an unstable economy. However, the revival plans are always there, but their implementation needs a favourable atmosphere, which can be challenging to attain. The employment rate, the Brexit after-effects and now the Covid -19 chaos, all mingle to create a big monster. The shaking economy is the result of these incidents.
Real estate investment – a deal of benefit or just a mirage
The natives of the island nation have many plans, and one of the most important is Real Estate Investment. Someone wants to buy a home, someone wants to get a land mortgage, and someone wants to buy office space for its small business and much more.
All have plans, but is it beneficial to invest money in the property market in 2020? The question is significant and demands attention and detail on many aspects.
How is the UK economy doing in the current scenario?
A Forecast by British Chambers of Commerce
As you know, the coronavirus impact is prevalent with its destructive effect all across the world. The UK economy cannot manage to be an exceptional case. Yes, the nation is facing adverse effects during coronavirus.
The outcomes of the BCC report are –
- UK GDP growth will fall sharply to rest on a low percentage of 0.8%, which is quite inferior to 1.4%.
- The impact of the low GDP is sure to show on the household spending, which will squeeze in its capacity.
- The weak financial strength of the people is sure to affect real estate investment decisions. If people are not able to manage well, even their necessary household expenses, how can they invest? The residential property sale will see a slow time.
- Business investment is also there to bear the contraction by 0.7% this means that the commercial property investment is at stake too.
The GDP growth rate is expected to rise to 1.4% in 2021 and 1.6% in 2022, but the current time is severe and unpredictable. The above outcome of the report is that the UK is not performing well. It means that the property market is in a fix.
Property price fall by 5% may bring some sale in the coming months
The prices of properties are 5% less, and this is expected to continue in the coming months too. It can have a positive impact on the overall sale. The investors and buyers are looking forward as the slow market is a golden opportunity for them to buy on pocket-friendly costs.
Despite the price drop, conditions are tough due to lower mortgage LTV
The lenders are working hard to tackle the large scale loss that has happened due to a weak economy. The renowned lenders in the UK mortgage market like Barclays, VirginMoney etc. are not able to offer the LTV higher than 60 to 65%. It can demoralise the determination of the investors. Existing applicants are in the regular contact of their online mortgage broker such as shine mortgages. to know at what stage their application is.
Resurgence rate of varied sectors in the UK
After all the ups and downs the real estate market in the UK is trying to revive. However, different sectors of real estate reacts are expected to respond differently. Here is a graphical overview of how different parts of the property market will react.
Stamp duty hike by 2% for overseas buyers will affect long-term
The recent hike on stamp duty for the non-resident buyers will show an immediate effect and will stay for the long term. Countless people with plans to invest in property have to change their strategy for the future. The hike, as well as the current market situations due to corona, is going to become the decisive factors. The investors, especially the commercial property investors, have to wait as already with derailed business, the comeback is difficult.
Merits and Demerits on investment in the rest of the year
The time is uncertain, but the future always has a hope to offer. Just as the UK economy is expected to grow, the real estate market has different shades to show too. But at the same time, investors need to take care of the risks.
It is not very wise to say that the real estate market has only a particular type of mood. The clouds are gloomy nowadays but the rest of the part of the year is expected to revive. Just hope for the best. Buy to let investment is a deal of benefit even now, but the residential properties want you to wait for a while. In short, at some points, yes it is good to invest, and on other aspects, no it is not very promising to invest in the real estate.
Author’s note– XYZ, the financial advisor keeps an intense eye on every change in the economy and its impact on varied sectors. This time, she is writing about the possibilities of the investment in the real estate market in 2020.