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Real Estate

Is it Time to Pick Up Investment Properties as Sellers Cut Prices?

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Property website Rightmove last week published data that showed over a third of property sellers have recently reduced asking prices. Of those that did slash the price they want for their property, the average they did so was by £2400. Rightmove also commented that while the UK’s property market typically slows at this time of year as buyers decide to hold off until after Christmas, this year the slowdown has been considerably more significant.

Sellers haven’t cut asking prices by as much in 5 years and Rightmove believe that it indicates falling levels of optimism on the part of sellers and the start of a tougher market, with buyers and mortgage lenders now taking into account the likelihood of higher interest rates coming.

While the development won’t be considered as good news for anyone considering selling their home, buyers on the look out for good value investment properties will have had their interest piqued by the data. Normally ‘buy on the dip’ is a strategy reserved for stock market investors but could now be a good dip for property investors to buy on?

In October, there was also a higher than usual rate of properties being reduced to sell more quickly. Of those that saw their asking price cut, this was by an average of 6.3%, referred to by Rightmove market analyst Miles Shipside as an ‘impromptu autumn sale’. While the growth in average monthly rents has also slowed, it’s still in positive territory, up 1.5% over the past year. This would mean that investment properties bought at a discount to the original asking price would be unlikely to see the rental income they can command also down, improving the overall investment case.

The big question investment property buyers will be asking themselves is when the best time to buy will be. Bargains, compared to earlier in the year, might be available over the next couple of months, but what is the likelihood of prices falling further in 2018? Well, it depends which analysts you listen to. Estate agents Savills predict 2% average price growth in property prices over 2018, and JLL 1%. However, both of those companies have a vested interest in painting a positive picture for the UK’s property market.

Investment bank Morgan Stanley, on the other hand, forecast a “modest housing market correction” next year. Analysts at the bank forecast an average price drop of 1.6% in 2018, with Q4 seeing prices drop 3% as Brexit approaches. With that in mind, it might be best to delay looking at investment properties until next November when discounts would be even more attractive. However, that would also mean losing out on a year’s rental returns in the meanwhile that might be expected to balance out that difference. And Savills and JLL might be right and prices could still see modest increases next year.

It’s hard to be sure when the best moment to buy might be but what Rightmove’s price cut data does demonstrate is that negotiating on asking price and keeping an eye on how long an interesting property stays on the market can be key to property investors making a saving.

Risk Warning:

Please remember that financial investments may rise or fall and past performance does not guarantee future performance in respect of income or capital growth; you may not get back the amount you invested.

There is no obligation to purchase anything but, if you decide to do so, you are strongly advised to consult a professional adviser before making any investment decisions.

Paul

The author Paul