Stoke on Trent & Staffordshire 2021 Housing Market ‘Prediction’
Welcome to this article outlining what I believe to be a few of the most fundamental factors that influence the property market in Staffordshire, especially the ‘investment’ housing market. I am by no means a data analyst, a macro economist and nor do I own a crystal ball or possess psychic powers. I do however have feet on the ground, relationships with property professionals in the area and a basic understanding of supply and demand.
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Waiting for a Market Crash – Could you be playing a Fools Game?
With the aftermath of Covid, I feel many investors, myself included at times are awaiting a market crash in 2021 . Sitting on the side-lines with a pile of cash, there are plenty of investors waiting for a repeat of a 2008/09 housing market crash in the UK, because after all, the only way to make GOOD returns is by following market trends and snapping up properties when they’re cheap, right?
I would be a fool to make any kind of prediction, I will therefore share three very basic and easy to understand (for my own benefit) factors why I believe you could be waiting on a platform with no trains due any time soon.
Factor 2 – Affordability
As I previously eluded to, Covid will see a lot of demographics face some real tough times, but some have had the sun on their backs harvesting hay like there’s no tomorrow. Unemployment is bound to rise as businesses have reduced trading and let’s not forget the monumental government debt that’s been incurred, we’ll pay for one way or another.
The second reason I believe a crash may never materialise is due to those who do have cash reserves, have plenty of it. The investment market will remain forever propped up by these cash reserves as saving account rates are down and inflation is only likely to go up, meaning cash reserves need to be stored somewhere to avoid it withering away.
It’s the old supply and demand scenario. Yes you may find that people become ‘motivated sellers’ (supply) but for every motivated seller, I believe there will be a ‘motivated buyer’, thus keeping the bottom end of the market afloat. That’s not even taking into account the likelihood of rents continuing to rise making property investing even more tantalising for those burdened with savings.
Factor 1 – Staffordshire Specific
The majority of buy to let landlords have found a sweet spot for maximising the returns on their investment in the sub £100,000 market. Any higher and you’ve got too much cash tied up and the rents do not increase in line with the property value.
So my first factor as to why I believe that you should continue to trade in all markets, is build costs. The cost to build an average 3 bedroom house in the UK right now would be in the region of £115,000 and that’s at the bottom end of the pricing range. I warned you this would be basic methodology, but that essentially means the land for an average existing investment style property in Staffordshire is worthless, at best.
What does this mean? Well the same property just 50 or 60 miles south could be worth triple, quadruple and beyond in price. The build costs aren’t too dissimilar, its the demand for the land that has inflated the cost. So to summarise, what I’m really getting at here is how far can the price of a sub £100,000 family property really fall?
There’s no ego’s, there’s no inflated prices and it already cost you less than it would to build!
To me, that shouts security, comfort blankets and uninterrupted sleep at night.
Factor 3 – Crash or a Correction?
Okay so anyone with an interest in property will, like me, have been humoured by the anarchy that unfolded following the reopening of the housing market in the summer of 2020. The pent-up demand resulted in sign erectors becoming the most sought after contact in the area with the ‘For Sale’ signs being replaced with ‘Sold’ signs in a matter of hours. Offers above asking price may be the norm in central London but in Staffordshire, bidding wars are not common place.
With 10 years of continued house price growth followed by a spike in the latter half of 2020 (West Mids avg house price shot from £195,000 to £217,000 in a space of just 8 months!) we are surely due a ‘correction’ in 2021. What will this correction look like? Well no one knows but with the government continuing it’s efforts to ‘smooth the curve’ of Covid deaths, the same efforts are being applied to nations economy.
A crash? I don’t think it’s likely, a correction? We’re probably due one.
In short, my parting words are as follows. Sitting around waiting for a ‘crash’ could result in wasted time and perhaps missed opportunities. A good deal is a good deal and will weather well in most market conditions, especially in the midlands. So next time Bill from the virtual pub pipes up with his housing market predictions, feel free to regurgitate the following famous quote.
“there are three kinds of people in the world: those who don’t know and don’t know they don’t know; those who don’t know and do know they don’t know; and those who know and know how much they still don’t know.”
Stick to the crypto Bill.