How to prepare for the 2021 Property Market Crash

Most property investors believe, there will be a property market crash in 2021.

Oh no they don't!

(Pantomime season started early this year)

I reckon that there might be the slightest of reductions when stamp duty gets added on again. Other than that, the government is going to do every thing it can to ensure that house prices do not fall. They will pull out every trick and offer they can to make sure that there is not a noticable price fall.

If they didn't, the conservatives would lose in a landslide at the next election.

If there is going to be a crash next year, what happens to the poor smucks who were drawn in by the PIN (property investors network) utilising OPM (other people's money) last year.

Will the investors be persuaded to take a haircut on their non performing loan because the tenants can't pay their rent, or will you double down and suggest the same smucks are pumped for more money?

House prices will continue to rise, in my humble opinion.
Whilst this virus has had a devastating effect on the finances of some, it has had the opposite on many others. Talking to a chap and his wife, both who are working from home, they are saving £300 per month on fuel, parking, wear and tear. Others are finding that they are able to make do with just one car between them. They are not able to go on holiday, or eat out or go to the theatre. Seriously, many people have never been so well off. And these are the same people who buy houses.
The poor souls who are being laid off tend to work in hospitality or entertainment or travel. They are at the lower end of the income spectrum and less likely to be home buyers.
I am generalising of course, but this is what I have seen so far.
This virus isn't going away. It is here for the long term, and even when the effects start to lessen we will find that working from home becomes more common.
People want an extra room for a home office and bigger gardens. And that applies to some renters as well.
There simply aren't enough houses to go round, and if people have got more money then they will compete with each other to secure the best houses.
Just my opinion of course. Other outcomes are possible !

I agree with Jesse Jones

Rising unemployment doesn't necessarily mean falling house prices. You also need to look at how monetary conditions have changed. Interest rates are lower across the yield curve (i.e. both short and long term interest rates) and the money supply has increased sharply. For example, the total level of retail deposits in the UK increased by £169 billion between February and August. That's nearly 10% up and £2,500 for every man, woman and child in the country.

So when the average family of 4 have seen their balance balance rise by £10,000 it suggests there's more money ready to be deployed in the housing market.

Reply to the comment left by Jessie Jones at 17/10/2020 - 10:48
As we know the mortgage market depends on the willingness of the major institutions to lend. They are backed up by major international banks so as to limit their aggregate exposure.
Frequently there are reciprocal arrangements whereby some English exposure is traded for some German or Australian or other exposure. They may be loans which are time specific or a securitisation.
As you recall Northern Rock was not bust in their day to day business but it was the lack of willingness of their lending banks to roll over existing loans which caused the problem. Had they securitized that part of their portfolio they may well have been ok.
You will not be surprised if I tell you that senior people in major international banks are looking at the uk economy and becoming nervous. They are looking down the barrels of Covid and Brexit. The perspective from the boardrooms of major banks on the European mainland is not too rosy.
Where other countries are making provisions for lockdown and the people are abiding with these terms that is not the case here.
Some of the major International banks will not be increasing their participation in the UK mortgage market. They may even be thinking of heading for the exit.
This news may not yet have reached the local High street mortgage broker yet.
The effect on the local market will be as serious as ten years ago. Cash buyers will be paramount. It will be a long hard winter for estate agents if lending is curtailed.
Regards
dp

Reply to the comment left by david porter at 20/10/2020 - 11:13
As a professional mortgage consultant and form banking analyst I can say that you really do not understand this subject. Most UK mortgage lending is funded from retail deposits and because of bank ring-fencing requirements, banks have an unusually large amount of funding to lend to areas like residential mortgages at the moment.

The securitisation markets are also open for those lenders (mainly the specialist lenders) that rely on this form of funding. Oh and by the way, Northern Rock did heavily use the securitisation market. It was the closure of that market in summer 2007 that ensured that they did not have the funds to continue without government support. Not sure what you mean by 'not bust in their day-to-day business' - if you run out of money to pay creditors when due you are facing insolvency.

Reply to the comment left by Rob Thomas at 20/10/2020 - 11:35
As I spent 20 years in the square mile decoking banks aggregate exposures perhaps I know what I am talking about?
We are agreed Northern Rock had to repay loans fro th e International banks.
They had not sold specfic blocks of loan as securitations, If they had they would have been tiered into several classes of junior and senior. Additionally some top slices would have gone to Bermuder finite players