As of writing this, we seem to have dodged a recession. However, many economists are still warning of difficult times ahead. This raises all sorts of questions about investment, not the least of which is whether property is still a good option.
The ‘will there be a recession’ problem
There is a problem with predicting a recession right now because the situation we are in has never been seen before.. That said, we probably do need to accept that many of the usual drivers for a recession are already showing. Inflation is rising, the pound isn’t looking particularly strong, the base rate is up here and overseas, and so on. However, before we get all gloom and doom about things, we need to take a breath.
If you are old enough to remember previous recessions and turbulent economic times such as the crash of 2008, you will know that this one is rather different. There has never been a modern economy recovering from a pandemic, for example, so there is no precedent to apply as to what effect that will have. Other oddities like low unemployment, most major industries still being strong, the base rate is up but it’s still relatively low, and the continued investment from overseas, are also in the mix. It is going to take a brave soul to confidently predict where the economy will go next in these choppy economic waters.
Recession or not, is it a good choice to invest in property?
With everything that has happened in the last few years, and the current market, you certainly need to think carefully about your investments. However, hasn’t that always been the case? In the end, when you consider investing in something like a city centre apartment, we are talking about a significant amount of money. So, should you be careful? Well, yes, of course you should, it’s a major financial decision. There are a lot of things to consider but, when you stand back from the situation, a potential downturn in the economy is just another factor in the overall picture. It isn’t the be all and end all of your assessment.
The fact is that property has always been one of the most popular choices for investors for some very good reasons.
- Property has regularly increased in value.
- We have all witnessed the value of property dependably rising for many years now and it has done, for the most part, for nearly a century.
- Recessions, depressions and market crashes come and go.
- Very few investors looking at a rental property are doing so for quick gain, so playing the longer game is not unexpected.
- All markets are about supply and demand, and demand for property is high.
- There is no shortage of tenants looking for somewhere to live. When the demand is there, a market is always open.
- Recessions are national but local factors make a difference.
- Cities like Liverpool and Manchester are booming and that means people looking for homes.
- When you are considering investing in property you budget for possible downturns.
The chances of any investment having some ups and downs are very high. Most seasoned investors simply see a downturn as an inevitable part of life and expect that it will be a matter of riding it out.
As I mentioned at the beginning of this article, the threat of an imminent economic crisis appears to have reduced considerably. Maybe it will be back maybe it won’t, but experience says that it takes a lot to make property investment unattractive to the long-term investor. It isn’t that I am not taking that threat of recession seriously, of course I am, but to be honest the property market is about more than bubbles in the economy. There is little that has the same resilience as property value and very few things are as reliable as bricks and mortar when it comes to investing.
Perhaps the actual question of whether it is a good time to invest in property is flawed. If you are an informed and shrewd investor, as all our client are, then can there ever be a time when it is the wrong thing to invest wisely? In the middle of the great crash of 2008, the average property price was hovering around the £168,000 mark. Last year it was just over £230,000, that probably says more than anything else about the long-term value of property investments.
I mentioned Manchester and Liverpool earlier as good potential investment areas. Whatever happens with any other factors, investing in the right property, at the right time is clearly going to make your money work harder for you. Somewhere like city centre Manchester, which is developing a new economic energy, is always worth considering. In the end it will always be about being able to invest well, invest wisely and find the right location to do so.
I should end with the usual statement that this article is not intended as financial advice. It is speculative look at the possible impact on the market of a recession or near recession. It’s my opinion, not guidance. Nobody can predict the future and the world is a pretty unstable place right now. I advise, as I always do, that you go with your own judgement. If the little voice in your head is telling you property makes sense, only you can decide whether to act on it.
Call us, let’s talk about where you could invest and, of course, whether it is right for you.