What’s behind the property price boom?

What’s behind the property price boom?

It is, on the face of it, a fairly simple question, but it’s a question that so far has failed to bring a consensus amongst those working in the property investment sector.

There are broad themes and contributors that many seem to have loosely agreed on. For example, we know that the government’s stamp duty holiday has driven a spike in demand above what we’d expect even from a high performing market.

The pandemic has somewhat skewed people’s confidence in their own judgement, in that whilst most expected the market to struggle, it actually performed better than almost anybody expected, so it might be fair to say that the normal rules of engagement have been thrown out of the window.

What we are seeing is a rush of people entering the rental market, and not just into rural areas as has been pictured by the media. Cities too are also thriving, experiencing a heightened demand into the market that hasn’t been seen for years.

In some ways that swift rise in demand is to be expected following the pandemic, however, nobody could have quite expected such a performance. As such, many questions are still left unanswered as to just what has caused this.

Increasing Demand, Tight Supply

As it turns out, the main explanation is surprisingly simple according to new research published by the Royal Institution of Chartered Surveyors.

According to them a pronounced lack of supply in response to huge demand is the main driving force behind this spike in prices.

In the report, it states that ‘The survey found that buyer demand had remained steady and consistent across the UK, but that the number of fresh listings was ‘insufficient’.’

‘The survey’s headline measure of house price growth rose again over the month, with a net balance of +75 per cent of respondents noting an increase in prices during April. This is up from a reading of +62 per cent back in March and has now become successively more elevated in each of the last three reports. Furthermore, all UK regions/counties are now seeing a sharp pick-up in house price inflation.’

These are fairly startling figures, even in the context of recent market performance.

Property investment

So, what does this mean for investors and landlords? Well, it doesn’t tell us anything revelatory, but it does re-enforce what we already know about the market, and shows us that, in all likelihood, this trend will continue through the year and beyond.

What we can conclude then is that now is the perfect time to buy into the market and increase your portfolio. The expected continued growth offers a golden opportunity for those who invest now to reap the rewards.

Demand is likely to rise further, and with not enough new stock coming to market the competition is set to become fierce, and a later investment won’t draw the same yields and capital appreciation as an earlier investment would.

As local economies explode back to life, the wider economic performance in the UK is set to be at its best since the second world war, resulting in prosperous conditions for investment.

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