For many economies, a recession is again on the horizon, which is the case for the UK. The economy is probably already in a mild recession, with growth expected to stay negative for the rest of this year. According to PWC UK, the forecast is that UK inflation will peak at 10.5% in 2022 as government policies limit the impact of energy price rises on household utility bills.
However, this economic recession is resultant of the usual economic cycles. The expected risk from the economic downturn can be mitigated if you buy well and hold it for Long-Term horizons.
In this weekly podcast, the NCRE Team answers all questions related to property investment, considering the current market and economic conditions. Here are a few insights:
Q-Are there any similarities between the recession of 2009/2010 and the current one?
A- Both recessions have one thing in common: the increasing interest rates. Where usually, consumers would start saving, which helps them receive a higher rate of return. The recession of 2009 happened due to the liquidity crunch, which is unlikely to occur at the current time due to the presence of many alternative lenders. At the moment, private lenders would be offering the same return as banks without the additional complexities, so opting for them could be a safer option.
Another similarity is the safety net provided to consumers with commercial property investments then and now. Property gains and the rental growth observed over the years are massive, making the property the most appealing asset. The people are holding property and not selling it to win big in times of recession.
Q-What strategies would work in the coming 12-18 months concerning property decisions?
A- Having communication with the commercial tenants is paramount. The best strategy is communicating appropriately with tenants, working collaboratively with them and providing them with solutions like assigning or subletting and offering additional tenants and guarantors and keeping in mind three keywords, FAIR, FIRM and INVENTIVE.
Thinking about Tenant Mixing is the key. Having a cohesive structure, where analysis of the concept of what you can offer to a singular and multiple units could make people come into the property.
Q-What is the right time to invest in property and general comment on the prices?
A- It is impossible to time the market. However, spending time in the market and analysing is a better way to find the right time. Now is the time to track all the property deals and email agents. Many properties are back on the market. Not to ignore the fact that mortgages are getting expensive and people are scared to keep going with their decisions on property investment.
However, those who have been consistent in the market should consider these investments as the market is down, and people need to sell quickly and accept lower offers. Considering the returns for the future 5-10 years and not just thinking about 10-18 months could be a better approach.
If you know your market and have sufficient information, then grabbing the deal that works best for you cannot have better timing than today.
Our lives have substantially changed in the last two years. The ways of communication have changed. Working in physical offices is required now more than ever, as we want to experience freedom from the years of being stuck in a physical place. We need assets that work with the new ways of life. With the current market and economic conditions, now is the right time for property investment. And we can help you make the right decisions.
To learn more, click on this link to listen to the rest of the podcast and get further insight.
