I was having lunch the other day at the
Gregory on the Drift, Grantham, with a local Grantham solicitor friend of mine, when the subject of
property came up. He asked me my thoughts on the Grantham property market for
the next five years. Property prices are both a British national obsession and
a key driver of the British consumer economy. So what will happen next in the
property market? So here is what I told him, and now wish, my blog reading
friends, to share with you.
Before I can predict what will happen over
the next five years to Grantham house prices, firstly I need to look at what
has happen over the last five years. One
of the key drivers of the housing market and property values is unemployment (or
lack of it), as that drives confidence and wage growth – key factors to whether
people buy their first house, existing homeowners move up the property ladder
and even buy to let landlords have an appetite to continue purchasing buy to
let property.
When the Tory’s came to power in May 2010,
the total number of people who were unemployed in town stood at 1,945 (or 3.7%
of the working age population in Grantham parliamentary constituency’s). Last
month, this had dropped to 878 people (or 1.6% of the working age population).
As the Grantham job market has improved
with better job prospects, salaries are rising too, growing at their highest
level since 2009, at 3.4% per year in the private sector (as recently reported
by the ONS). That is why, even with the
colossal turbulence of the last few years, property values in the Grantham area
are only 2.86% lower today than they were five years ago.
Many home occupiers have held back moving
house over the past seven to eight years following the Credit Crunch but with
the outlook more optimistic, I expect at least some to seize the opportunity to
move home, releasing pent up demand as well as putting more stock onto the
market. With a more stable economy in the town, this will, I believe, drive a slow
but clearly defined five year wave of activity in home sales and continued
house price growth in Grantham.
I forecast that
the value of the average home
in Grantham will
increase by 18.6% by 2021
18.6% might sound optimistic to some, but
according to Land Registry, values are currently rising in Grantham at 4.4%
year on year, I believe my forecast to be fair, reasonable and a reflection of
both positive (and negative) aspects of the local property market and wider UK
economy as whole.
However, it wouldn’t be correct not to
mention those potential negative issues as I do have some slight concerns about
the future of Grantham housing market.
The number of properties for sale in Grantham is lower than it was five
years ago, restricting choice for buyers (yet the other side of the coin is
that that keeps prices higher). Interest rates were being predicted to rise
around Easter 2016, but now I think it will be nearer Christmas 2016 and
finally the new buy to let taxation rules which are being introduced between
2017 and 2021 (although choosing the right sort of property / portfolio mix in Grantham
will, I believe, mitigate those issues with the next taxation rules).
I am telling the landlords I speak to, that
with interest rates at their current level 0.5%, the cash in your Building
Society Passbook is going to grow so slowly that it might as well be kept under
their bed. Property prices, by contrast, have rocketed over the years, even
after the property crashes, far outstripping bank accounts and inflation.
So my final thought ... property is a long term investment, it has
its’ up and downs, but it has always outperformed, in the long term, most
investments. Those in their 40’s and 50’s in Grantham would be mad not to include property in their long term
financial calculations. Just make sure you buy the right property, at the price
in the right location. One source of information on such matters would be the Grantham
Property Blog
