August 2020 Market Update and Why is The Glasgow Housing Market Defying Gravity?

August 2020 Market Update and Why is The Glasgow Housing Market Defying Gravity?

By Gordon Campbell

26^th August 2020

Since our last market update a lot has happened!

At Alliance we were still busy during May lockdown and June/July have been our busiest months ever for new clients, sales, completions and refurbishments.

A big thank you to everyone. We truly appreciate it.

As the world, UK and Glasgow comes out of lockdown, we are seeing mixed successes and how each country continues to deal with Covid.

What is happening with Covid in Scotland and Glasgow?

Scotland’s virus recovery success has been mixed with most cases being in care homes. It is very much under control now and cases are low.

We and we are seeing some patches of cases in parts Scotland and cities appearing. These localised cases are being dealt with localised.

Every case and fatality we hear and read about is tragic.

Stay safe everyone.

What’s Happening Economically?

As life returns to the ‘new normal’, the economic impact of lockdown globally, nationally has been felt but there is green shoots already.

UK’s GDP hit was huge in Q2; 

It can be argued that *were* in recession - the sharpest drop ever recorded - but the recovery started in June (see graph below).

UK economy started growing again in May. 

So as of the end of June it was around 17% smaller than pre-crisis levels - better than April, when it was 25% smaller.

All depends on what happens now with the pandemic now. 

How is The UKs Housing Market doing?

Britain’s housing market appears to be defying gravity.

Though the country is experiencing its deepest recession on record, prices have remained robust and transactions have resumed.

Expectations that interest rates will remain low have helped boost house prices alongside gold, tech stocks and many other assets.

But the question remains for how long the UK’s property market can keep resisting economic forces pulling prices down. 

While Britain’s economy shrank during the second quarter of 2020, house prices were about 1.7 per cent higher than a year before in July, according to the Nationwide Building Society. Official data is not yet out but transactions also appear

Partly this reflects pent-up demand.

Neither buyers nor sellers were able to act when the economy was under the strictest lockdown. House viewings were some of the first economic activity to resume but it takes a lot longer to buy a house than to order a drink from a bar.

Many of those who could work from home saved money on their commute and other associated costs while noticing, once again, all the things they did not like about their house.

The government too has added to demand by cutting the rate of stamp duty, a tax levied on transactions.

Generally house price drops have been both a cause and consequence of recessions: accounting for inflation, house prices fell by about 30 per cent during the 2008 financial crisis and never regained their pre-crisis highs, according to calculations by the Resolution Foundation think-tank.

 Consumer confidence is closely tied to the value of what is usually a household’s largest asset. Lower prices can also feed through into lower investment spending: mortgages represent the bulk of banks’ assets and construction is among the most volatile parts of national income. 

The government’s furlough scheme, which replaced 80 per cent of eligible workers’ incomes, comes to an end in October, but as companies have already had to pay some of the costs of employing them since August, unemployment is forecast to rise for the rest of the year. 

What Does Historical House Prices Show Us?

🇬🇧 Historically, the price of properties in the UK has doubled every 8-12 years depending on the city.

Property prices have risen 256% in the past 20 years even with the 2008 crisis, simply because demand is so high that supply has a hard time keeping up.

We know that it is during times of crisis that the best opportunities arise which is why we are investing in this market, one of the best in the world. 

What About House Price Growth and Rental Demand in Glasgow?

We are seeing this very strongly in Glasgow. 

A mini boom. 

No surprise that UK activity levels have rebounded strongly post lockdown,

UK house price growth rate expected to remain positive for 2020.

Property is in demand more than ever, especially BTL, as we had predicted. 

What About UK Regional Trends?

Scotland, driven by Glasgow and Edinburgh, leads the UK for annual price change at + 6.3% and quickest region to sell at 53 days. 

London drags down the national average asking prices to a 0.2% fall. 

Final Thoughts

It is no surprise that we are not living in normal times at the moment.

Everything is not a bed of roses and the larger economic impact may be still to be felt as people come off furlough.

Everything is taking longer.

Going to the supermarket.

Trying to get an appointment for anything.

Trying to get information from a government or local authority

It is very frustrating.

That will change as we get through this.

There is always one positive long-term constant.

Property!

James and I have owned property for a combined 37 years, been through 3 recessions and all the ups and downs of the economic cycle, it never fails to serve us very well as the previous graphs have shown.

If you focus on property on a medium to long term strategy, you cannot go wrong.

There always is and always will be a demand for it.

Especially Buy To Lets.

Simple, Secure, Multiple Strategies, Entry level Prices and Always in Demand for Buyers and Tenants.

Property investment is about time in the market, rather than timing the market.

Property is a long-term investment.

Alliance Property Group offers a unique service of Off Market properties in a good location, at a great below market value price, in good condition and an area where there will continue to be demand for your properties, regardless of the economic cycle.

We share our 35 years’ experience as proven and successful Buy to Let investors and landlords, knowledge and partnering teams and help you create wealth and income.

Thank you and take care.

As always if any questions or if we can help in any way, please contact us.