Where to invest in the property market in 2020

    22 January 2020

    Sharpen your pencils and get ready for a new property boom. Clean up your credit rating. Eye up that new sofa. But this isn’t an “anything that moves” property boom: smart investment driven by connectivity, sustainability and practical design will reap rewards. Property owners who neglect their assets could well see themselves being left behind.

    First things first. you need to understand what’s just happened so you can assess the market and begin to identify the real opportunities that make this a time for you to get on the ladder or trade up.

    The housing market has been treading water for the last decade. The election of David Cameron as PM with the Lib Dem coalition proved to be a disaster for many homeowners. Although some made off like bandits (notably house builders and some canny overseas investors), for many, returns were fairly dismal when it came to the property they lived in. A few lucky investors will have made good returns if they bought after the financial crash but really, we saw a return to pre-bust levels.

    We also saw the end of the buy-to-let frenzy. The earlier part of the decade saw a brief return to the business as usual mentality. By 2015 markets up and down the country had stalled. Tax measures such as increased Stamp Duty and more difficult lending criteria piled on the pressure. Market volumes fell and mortgage finance became more difficult to secure. By the end of the decade, indecision over Brexit and the spectre of political plundering of the nation’s assets simply put people off. A generation of millennials often found the market perplexing, expensive and preferred to travel the world and experience rather than plough every last penny into a home. After all, if performance is going to be lacklustre, what’s the point?

    In contrast, 2020 will be the year of clarity. With a majority government for the first time in a decade, we’ll see the difference leadership can make. As any smart politician knows, the key to a succession of election victories is a vibrant housing market. With that in mind, the stage is set for a re-boot of the nation’s favourite form of investment.

    Once Brexit has taken place and the shape of our new relationship with Europe and the rest of the world begins to clarify, so markets will free up. But before you rush in and think everything is fine, it won’t be universal and so you’ll need to be smart. This also means you have time on your side to get the right deal. It’s still a buyer’s market. And you must be prepared to play the long game. The short flip and quick win won’t feature until or unless Stamp Duty is cut down to size.

    We are all bored of Brexit. After all, it’s been the talking point, sorry angry arguing point, for the past three years. Will February 1st be the new dawn? No. And that’s good news. Until we know what our future relationship is in regard to the rest of the world and indeed the EU, traditional investors will take a wide birth. They’ll be looking for tax breaks and changes which are just unlikely at this early stage of the government’s existence.

    If you are smart, you’ll look closely at the areas likely to get most attention. Areas that are urban but Conservative in the south. And areas that have recently turned Conservative but are by no means true blue heartlands in the north. I always advocate looking for infrastructure. CrossRail or The Elizabeth Line, will open. Eventually. There are a lot of new build developments surrounding the new line and they have not sold as quickly as they should. There are still deals to be had.

    But if you are looking outside of the capital, expect to see market movement in Manchester, Birmingham, Leeds and Sheffield. Look further afield to the commuter towns and villages outside these major cities. And in particular those towns that have a lovely pub, great amenities and good schools and are within half an hour of an international airport.

    New build is worth considering if you get the right deal. But don’t pay a premium for it. Similarly, don’t always think that period housing is going to perform best. Some buyers are shying away from the notion that an Aga, with duck egg blue woodwork is their classy idyll. Instead they are going for sleek, modern properties that are often better laid out, properly spec’d with all the latest tech and precision. There are so many features such as LED lighting systems, speakers and lights sunk into walls and ceilings, underfloor heating, home management systems that are app based and other accoutrements that you’ll find are difficult to stuff into a dated house. Look for a house that has been “done” and to a high standard. Also think about outside space, off street parking, a garage or outbuildings. A nice shed or even a pool. Keep an eye out for features that are a total pain to build but if you have them are an absolute win.

    You could take the view that you will sit it out and wait for changes. Consider government policy:1 million new homes are to be built in five years. They can only get that sort of build volume if they free up the market, allow housebuilders to borrow and if there are buyers to snap them up. The market probably won’t deliver as many houses that are required whilst a larger proportion of the population will be rekindling their interest in property ownership. Economics and common sense tells us that the market will improve.

    Sentiment is everything in the property market and trends will drive what has value. And it’s design, style and live-ability that will do the work. Choose carefully. Negotiate hard. Be careful with the mortgage product you select and take care over the works you do. An Englishman’s home is his castle – property ownership runs deep in our national DNA and 2020 is the year in which we will see this national characteristic returning in force.

    James Max presents the Business Breakfast on TalkRADIO and is a chartered surveyor