‘London, New York, Hong Kong, Istanbul…. Birmingham – the global property market unwrapped’
James Forrester is a property expert and regular media commentator on the housing market and Managing Director of Barrows & Forrester the leading estate agency in Birmingham.
The surprising truth is that there are but a handful of countries that have seen declines in residential home values and these include India, Morocco and Malaysia.
Leading the way in the past year or so and at least until Q1 of this year, the period for which data is available, are in order:
1. Turkey +32%
2. New Zealand +22%
3. Luxembourg +16%
4. Slovakia +15%
5. The USA +13%
12. UK +10%
There are a total of thirteen countries that have seen double-digit growth in that time. It’s rather remarkable.
Or is it? Because in much the same way that when a global crisis hits investors retreat to the dollar and to gold, doesn’t it make sense for us ordinary folk and property investor types too to lean into an asset class that is safe? Literally, as safe as houses.
But there’s something more going on here and that’s the question of some psychology at play or more to the point FOMO.
FOMO, the fear of missing out, is certainly something that I have witnessed as an estate agency principal in recent months fuelled by Chancellor Rishi Sunak somewhere in the distance waving his chequered flag as he signalled the end of the stamp duty holiday on 30th June just gone. Yes, there’s a small consolation taper until the end of September but it’s minimal at a saving on just the bit of the purchase price between £125,000 and £250,000.
But the stamp duty relief that Sunak instigated in July 2020 was a significant enough saving to inspire buyers to push transaction levels in the UK to that not seen since 2007 and with price growth almost everywhere across the country mirroring that of those pre-financial crisis years. Everywhere except London that is which has seen far lower growth but growth nonetheless.
Property purchasers have clambered to buy bricks and mortar in order to save an average of £4,000 on the typical home value but up to £15,000 on anything above £500,000 as the relief applies to all purchases and all purchasers that transact at any price. In other words, the buyer of a £2m home would still benefit from not paying stamp duty on the first £500,000.
Incredible generosity on Sunak’s part really and all designed, of course, to fuel the market in order to buoy sentiment and help drag the UK’s shrunken economy back to life.
But the party’s over and so what now?
Well, still the latest data from the Bank of England shows that mortgage lending and approvals are up and what we must realise is that all of this activity has been going on without one particular and significant factor being in play – international buyers.
The UK has benefitted hugely from investment in residential property by buyers from the Middle East, Russia, China and the Far East up until March 2020 when of course travel and therefore viewing opportunities were curtailed. In some parts of London, so-called foreign buyers can form up to 25% of property transactions and these are surely set to return given the historic attractiveness of Britain and its capital.
A stable economy, a trusted currency, a solid banking system and, to a degree, a robust political backdrop all contribute to a safe-haven for international monies to be parked. Add in ridiculously low interest rates, unhindered by EU Central Bank interference, and you have a recipe for ongoing demand and therefore price growth.
But, London is not the only place where it’s at. Regions such as the West Midlands, the North West and the North East start from an attractively low-price base and will tempt investors, especially as universities return to normality and students over run the rental market once again
This should help boost the already impressive ‘Northern Powerhouse’ which could soon be set to grow stronger with the long-awaited HS2 rail line linking the south to the north in record time. This particular area of the market already offers rental yields that are typically much higher than the pricey home counties and London itself.
Britain is open for business and at number 10 in the global league table above, can hold its head up high as a key property market and in fact I’d argue, respectfully, that the dizzy heights of Turkey et al cannot be sustained and these areas may well see a sharp correction versus the UK’s more palatable increase of late. Time will tell and whether the clever money, most of it anyway, returns here.
My money is on the global property landscape favouring traditional enclaves once the current noise has all subsided. London, New York, Paris…. but don’t discount Birmingham, Newcastle and Manchester as they may turn out to be somewhat safer and more liquid than some more ‘emerging’ of international markets in the coming months.
The Barrows & Forrester team welcome any questions on the benefits of investing in the West Midlands and North West property markets and are happy to share their expertise.