I was having lunch the other day with a local solicitor friend of mine, when
the subject of property came up. He asked me my thoughts on the Cardiff
property market for the next five years. So here is what I told him.
Before I can predict what will happen, I need to look at
what has happened 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.
In May 2010, the total number of people who were unemployed stood
at 2,458 (or 5.32% of the working age population). Last month, this had dropped
to 1,440 people (or 3.05% of the working age population).
As the Cardiff job market has improved, salaries are rising
too, growing at their highest level since 2009. That is why, even with the turbulence
of the last few years, property values in the Cardiff area are 10.63% higher
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, this will, I believe, drive a slow but clearly defined five
year wave of activity in home sales and continued house price growth.
I forecast that the value of
the average home
in Cardiff will increase by 16.2% by 2021
16.2% might sound optimistic to some, but according to
Land Registry, values are currently rising in Cardiff at 2.8% 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
Cardiff housing market. The number of
properties for sale in Cardiff 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 Cardiff 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 Cardiff 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.
