Hi, Peter Jones, author, property investor, ex-chartered surveyor.
And a question which I am often asked is “What’s going to happen to property prices?”
Well, I wish I knew, I wish I had a crystal ball.
But there are certain things that we can look at within the economy which are going to give us a good indication about what’s going to happen over the next few years.
Now, of course, in classic economics terms we often think that property prices are driven by supply and demand, and one of the arguments which you’ll hear is that we’re small island, we’re not building enough houses, therefore prices have to go up. And there is some truth in that.
But if that was the total truth, if that’s all it depended upon, if you think about somewhere like India, for example, where there’s a billion people then that would imply that property prices would be like a million pounds per property, and I’m sure it isn’t the case. So, there has to be more to it.
One of the things which I think is a big drive which we often don’t think about is the availability of money. Because you can have demand, but if there’s demand, which is like a want, that’s not quite the same as being able to express that or turn that into the ability to purchase. We all want stuff, but we can’t necessarily afford to buy it, so the demand in itself isn’t the main driver, it’s the availability of cash behind the demand.
Another thing to be looking out for, apart from whether the money’s available, we can spot that through interest rates. Are they going up? Are they going down? Are the banks lending? Is it easy to get a mortgage? That’s going to drive property prices.
Another thing to look at is rents. Because when rents go up, inevitably at some point, you are going to find property prices will go up as well.
This video is only a very short video so I can’t go into all the, sort of, mechanics of it but basically prices, values, and rents are inextricably linked so if rents start to go up that will push the return on properties up wish means that at some points investors are going to think ‘actually I want to put my money into property, into that type of property, and they’ll then bid the return down by pushing prices up.
It’s a complex thing, actually I could probably make a video which goes on for hours and hours about this but this just gives you some ideas.
So, don’t think just about supply and demand, although that’s important. Think about some of the wider issues as well, which are equally important, but not always obvious to see.
Until next time, here’s to successful property investing.
Peter
Peter Jones
(ex) Chartered Surveyor, author and property investor
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