Date. 1st February 2022
The property market is the state of all the transactions, buying, selling, transferring and the activities of property development. Which relate to property, whether in the residential, rental, retail, commercial, industrial or other sectors. It is called the real estate market. However, more often than not, the term property market is used to infer the housing market and the health of both or either is a frequent topic of national speculation and an indicator of the state for the wider economy. When the totality of all the transactions is positive and rising, the property market is said to be healthy. When it is depressed with few transactions, it is said to be sluggish or in a slump, in the doldrums or a bear market. Other sectors of the economy may be affected by the property market, including housebuilding, offices and other commercial building, the rental market and the D-I-Y sector.
The property market is linked to a host of factors which include levels of investor confidence, domestic and foreign, supply and demand, including the number of homes being built, interest rates and the availability of finance, employment or unemployment, taxation, political developments and stock market activity. Some of these factors can be interdependent.
Price behaviour. In the Caribbean house prices have seen dramatic rises to 7% in 2021, it seemingly unrealistic levels followed occasionally by dramatic falls. Sometimes it is not possible to get a homogeneous national picture of property market conditions, as an example, it has seen a split in the housing market with strong activity and challenging conditions such as the pandemic etc. However, rising prices alone do not necessarily mean a heathy market, it is possible for annual house price growth to edge up by 3%, yet the market may be subdued, perhaps by lack of confidence prevailing in the economy, or the prospect of future negative events impacting the market. Also, the housing market may be depressed but the demand for commercial office space be high and, as a consequence, induce a spate of tower block construction. Property markets generally benefit where there is availability of independent research and transactional evidence, both of which help to give domestic and foreign investors greater confidence regarding market conditions and a basis from which to proceed.
In the UK housing market has hugely benefitted from numerous web-based services which give free advice on property prices and market conditions. When a homeowner can see that similar properties in the locality have sold for a certain price, they are more likely to put their property up for sale with confidence. There is a misconception that a rising property market is good for property owners, particularly the owners of housing. Generally, when people move house, they move from a less expensive to a more expensive property and so high prices will actually be detrimental to them. It is only when an owner is down-sizing, moving to a less expensive area, or exiting the market altogether that high prices are beneficial.
The term housing market is used to describe the state of transactions in a particular area concerning the housing market stock. The housing market stock includes privately owned houses and apartments, privately rented and public rented accommodation, as well as housing association property. Factors affecting housing market health. Confidence A major factor influencing the housing market is the level of confidence that exists around the buying and selling of homes. Thus, a depressed market will not only involve fewer house buying transactions and possibly lower house prices, but also lower investor expectations for the short and possibly medium term. Interest rates. When low mortgages will be cheaper and so more affordable.
They tend to remain cheaper if the economy is weak, with no or fewer increases in interest rates. High interest rates increase the cost of mortgages, deterring some buyers from entering the market and making property less affordable. Interest rates will also affect the ability of developers to raise the finance necessary to construction new housing. Supply and Demand. The number of homes being built. Like all markets, housing is affected by the interplay between supply and demand. When the supply is high, prices tend to be lower and vice-versa. If not, enough homes are built over an extended period, the result could be a shortage of homes and a rise in the number of people renting.
Economic Growth. Higher economic growth usually brings rising incomes, with more people having more money to spend on housing, increasing demand and pushing up prices. However, this may in turn lead to increases in interest rates and so the cost of mortgages. Mortgage availability When banks and other lenders tighten mortgage availability, housing market activity becomes depressed and demand drops. Affordability in house prices. The more take home pay is spent on a mortgage, the more unaffordable housing becomes. This can be a deterrent to potential buyers. Affordability is an essential subject in the housing sector and potential buyers are acutely aware when homes are unaffordable. Location. This always has a huge influence on desirability and therefore price is sought after the area may not be subject to the fluctuations experienced by other less desirable areas. Stamp Duty. When it is low or non-existent depending on the home price more buyers will be likely to come into the market. However, stamp duty has progressively increased as house prices have increased and it is now a very significant deterrent to buying property. In expensive areas such as London, stamp duty can be many tens of thousands of pounds, and home owners are more likely to improve not move as investment in improving their property is likely to be returned on its eventual sale. Whereas stamp duty is a direct and unrecoverable loss, often paid out of income that has already been taxed.
Housing Ladder. In recent years, buying a home has, for most, become extremely expensive and for some young people almost impossible. This is widely thought to be the result of a housing shortage in UK. The housing ladder or property ladder is a metaphorical term that is much used in the UK to signify the enormous undertaking that buying a house represents but also to show the possibility of ascending to higher levels of home ownership. Ownership typically begins with the purchase of a first property, a house or flat usually at the lower price bands of the market. In acquiring such a property, the purchaser is said to have ‘got their foot on the housing ladder or be on the first rung of the housing ladder.
The implication is that being at the bottom there is still some way to go, but the achievement may nevertheless represent the start of lifelong home ownership. Even though much money may be owed on the property, typically through a mortgage, the purchaser is still regarded as a home owner who, as a result, is firmly on the housing ladder. Subsequent property purchases are seen as moving progressively up the ladder, until middle or even age would see most people acquire their final property. At this juncture, they have probably reached the highest rung they can achieve in terms of property ownership. A number of initiatives have been introduced to help first time buyers get on the housing ladder, such as rent to buy, help to buy and so on.
Succeeding in property market isn’t so easy, but with the right knowledge, the chances of finding success are much higher. A property market analysis is one way to ensure that you’re taking the right step in your journey as a property investor. If you’re looking for investment properties, it is essential to do in-depth market analysis, which can determine the best possible price for each property. You should always research the market before investing your money in any type that will generates the highest returns.
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