Property values soar thanks to post-lockdown demand
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Rightmove expect prices to rise further before year-end, says finance expert Peter Sharkey.
Considering the extraordinary nature of the times in which we’re living, coupled with a seemingly constant newsflow of tiresome, repetitive negativity – the default position of our ‘national’ broadcaster, it may come as a surprise to learn that UK plc has not yet gone to hell in a handcart.
This week’s edition of Investors Chronicle, for instance, provides a list of company shares that have been in great demand over the past few months, noting the degree to which their share prices have risen.
Online white goods retailer AO World, for example, has seen a 64% increase in its share price since July; shares in cycling retailer Halfords have risen by 57% over the same period; Royal Mail shares have soared by 37%, while DFS Furniture has witnessed a 28% increase in the value of its shares since the summer.
These are significant increases over a relatively short period, but perhaps the most noteworthy rise in asset value has been in the domestic property market. Against all the odds and amid a background of almost perpetual doom and gloom, asking prices for new homes coming to the market have risen by 5.5% over the past 12 months according to property portal Rightmove. October’s asking prices alone were more than 1% higher than the previous month and Rightmove expects a further increase in values, worth an additional average of £4,600 per property, before the end of the year.
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Property buyer demand has been an unexpectedly positive feature of lockdown. It’s been driven in part by the availability of extremely cheap mortgages, the temporary suspension of Stamp Duty, aka ‘Daylight Robbery’, though it will be imposed again from the beginning of April, and by the euphoric release of stifled and meaningful consumer demand.
Indeed, in an effort to dampen seemingly insatiable demand, this week a number of smaller lenders have either pulled higher loan-to-value mortgage products or pushed borrowing rates a shade higher.
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As for what might happen in 2021, who knows? Given what we’ve contended with since mid-March and considering the questionable nature of predictions regularly spouted by ‘experts’ over the past seven months , forecasts of how life will unfold in the future must be taken with a very large pinch of salt. Better to deal in what we know will happen.
Here’s one certainty: at some point, the billions of pounds of additional borrowings used to keep people in work and thousands of businesses afloat will have to be paid for.
To fund central government largesse, Chancellor Rishi Sunak has issued bonds worth tens of billions to banks and other institutions happy to snap them up. Fortunately, Great Britain has one huge advantage over almost every other sovereign state: this country has never defaulted on a debt – which is why British bonds are called gilts, ie they’re effectively gilt-edged.
Our credit might be first-rate, but only because we settle our debts. Accordingly, we can guarantee that the Chancellor will, at some point, need to raise taxes to service our vastly inflated debt. In the relative short term, he will also need to raise more cash to either a) continue subsidising wages or b) pay unemployment benefit over a prolonged period.
Hailing from a generation which instinctively understands that all debts must eventually be repaid, homeowners aged 55 and over will be mindful of these stark facts of economic life while keeping a close eye on their retirement income – and the steadily rising value of their homes.
Following our report last week which noted recommendations made by the Centre for Policy Studies (CPS) to change the state pension’s ‘triple lock’ to a dual lock, our electronic mailbag swelled with emails from dismayed readers. Most were appalled with the CPS’s assertion that the “triple lock has become an engine of unfairness, ensuring that pensioners’ incomes are always protected at the expense of other generations’”.
Nevertheless, despite reader despair, we cannot avoid the fact that existing ‘triple lock’ arrangements, which determine annual increases in the state pension could be ‘tweaked’ and become a ‘dual lock’ as the Treasury seeks to raise as much money as it possibly can.
Fortunately, most homeowners’ greatest asset, namely the wealth tied up in their home, has, as noted above, almost certainly risen in value over the past 12 months. Releasing a portion of this wealth could provide a timely financial boost and potentially counter any plans the Chancellor may have to play around with the state pension.
Your retirement planning may involve equity release, but how much could you release from your home? The figure is determined primarily by your age, health and your property’s value, which must be at least £70,000. These are the principle requirements, although alternative options exist based upon personal circumstances. You can get a very good idea of how much equity you can release by visiting the Moneymapp.com website and filling out the equity release calculator.
It’s worth noting that equity release isn’t a panacea. It’s not suitable for everyone and it may compromise your eligibility for means-tested state benefits.
As many readers have already discovered, there’s a wealth of information to be discovered at: www.moneymapp.com/equity-release . In addition, there are hundreds of blogs and articles dealing with the subject on the Moneymapp website, including Peter Sharkey’s weekly blog, rated among the UK’s very best. Read more at: www.moneymapp.com/blog
You may still email any queries or questions regarding equity release to: email@example.com
Please note that Moneymapp.com cannot advise readers on whether equity release is suitable for them. However, Moneymapp.com can introduce readers to professional advisers who will explain the process and its implications for your estate and entitlement to means-tested state benefits.
Funding lockdown-inspired aspirations
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For more financial advice, check out Peter Sharkey’s regular column, The Week In Numbers.