I have to confess to more than just a ‘soft spot’ for property as an asset class. I have spent 17 years in the industry, working across residential, commercial, social housing, hotel developments, lending, and prop tech. I’ve been personally purchasing rental property since 2005.
The vast majority of those years have been dreamy for property investors; broadly rising prices for the time (despite the exception of the 2008 general financial crash) great rental yields, a generally supportive political environment, and, personally, I’ve been lucky to have mostly good tenants. I remember the heady noughties, when a vast ecosystem of property companies sprung up, helping people replace their hated 9-5 jobs with a rental portfolio.
More recently, the property market has been somewhat in the doldrums. Even before COVID hit, a survey by Shelter in late 2019 found that just under half of working people living in privately rented homes in England would be unable to afford rent for more than a month if they lost their job. To break this down: even without a COVID recession, a significant proportion of people would be unable to pay their rent if they lost their jobs, within one month.
There is no starker warning about an over-cooked property market, before you throw a whopping coronavirus recession at it.
2020 has been a strange time for the property market. Understandably, no-one could sell nor buy, over the strictest lockdown period, and more recently, with restrictions easing, there was some pent-up demand, as those who has been desperate to move were able to do so. However, in practise, we have stuck a giant sticky plaster over the problem.
Landlords and owner-occupiers alike were given mortgage holidays, and there is currently a 6-month process for a landlord to serve notice on their tenants. It also remains to be seen just how bad the unemployment rates will be as the furlough scheme is gradually withdrawn – which quite rightly provided a lifeline to 8.9 million people over the summer, and a lot of breathing space for paying rent.
Similarly, there is a stamp duty holiday, for properties up to £500,000 until March next year, yet none of these measures are long term fixes – indeed the Center for Economic and Business Research (CEBR) projects that property prices will fall by 14% in 2021. As we survey the wasteland of the economy as we attempt to recover from the COVID recession, property investors fasten their seatbelts and expect, at best, a bumpy ride. Indeed, my personal prediction is that 2020 will be a 3-5 year high for property market.
In the past few weeks I have spoken with a plethora of property professionals, be they buy to let investors, letting agents, investment agents, or property mentors, all of whom are rightly worried about the short-term outlook for property. They are diversifying out of necessity rather than choice. In the quest for yield, even the most loyal property enthusiasts are having their heads turned up the year to date growth stats for crypto: at the time of writing Bitcoin is up 41% and Ethereum is up 166%.
I see property and crypto as wildly compatible and supportive of each other. To participate in buy to let property in the South East of the UK, you will need in the region of £60,000. For most crypto fans they are deploying far less. Indeed, it has also proven popular for those who are trying to grow their deposit to purchase a property. Further, crypto is far more flexible and liquid in case of “a rainy day”.
My only exit from property has either been either via re-mortgage taking 1-2 months, or a sale over 3-6 months; not great in the current uncertain climate. Crypto can be sold, in minutes, on a major exchange, those purchasing the bluechip cryptos (Bitcoin, Ethereum, Litecoin) are able to take advantage of a daily market of tens of billions of pounds – they can sell some or all of their crypto should they need to.
Crypto today feels to me much like property in the late 90s; few people were expecting it to sky-rocket, nor were many people conversant with building an empire from it. Crypto businesses seek to “educate” to the broader population about the crypto industry – it is no longer the preserve of the niche and nerdy.
Indeed, according to the FCA over 3% of the UK adult population owns crypto already.
In my opinion, in the near future, as the recession really starts to bite, the population will be starkly divided into those who have done their homework on diversifying into this asset class, and those that haven’t.