This is my first property blog, so that’s an important fact to get out of the way first.
The second fact, is that I am writing this between the joys of home-schooling three hyper children and trying, like many of you, to keep my business going at the same time.
That said, no excuses, as I intend to give you my own thoughts on where I see things in the residential property market, here in Northern Ireland, in the time ahead.
Better still, I intend to go further than that, and bring some other industry leaders in to this conversation in the weeks ahead to pick up on the insights I am offering in this piece.
The Why – Covid-19 outbreak
As I write this, the fundamentals are sadly that over 1m people in the world have been diagnosed as positive for this virus. In UK and Ireland terms we have lost in the region of 8,000 of our neighbours, family and friends to this disease. That is a shocking loss of life and obviously the most important thing right now!
After we have recovered from being ill, the world economic outlook would suggest that financially we may also become sick.
These really are unprecedented times. In response, to a greater or lesser extent, the entire private sector is technically being nationalised by the Governments. There is a myriad of problems with this both short and long term but those issues are not for now.
In these very uncertain times for us all there is a lot of noise out there. It is important, in this new normal, to use our new found ‘head space’ to assess how we are going to position ourselves in the weeks and months ahead. Put simply we need to focus on what our plans are to position for success on the other side of this tsunami.
Recently I have read publications from some property experts offering their views in the current challenging climate. One earlier this week, from Jordan Buchannon, Economist at Property Pal was particularly noteworthy and I found it, in the main, merging with my own recent assessment of where things stand. Thanks to my business mentor Gavan Wall for encouraging me to share my own thoughts in this blog. I am doing my best to become more comfortable being uncomfortable!
The Fundamentals – Why Property
“As safe as houses” is not an accidental term. Property has proven to be an obsession in Ireland and the UK and here in Northern Ireland citizens continue to be driven to “get on the property ladder”. It has proven reliable in the long-term for growing our assets and wealth or simply in having the security of owning our own homes.
When my late father retired from the Bank in 1993 and started his property journey interest rates were at 12 %, hardly an incentive to borrow money to start investing in bricks and mortar. Despite that reality, he did just that and built up a very sizeable portfolio that is still performing solidly to this day, long after we lost him to illness sadly in 2012.
The attraction to property, apart from the emotion of owning something, is that it provides safety, security, capital growth, cash-flow and when done properly, can enable us to reap rewards in the short and long term.
Covid-19 has not, and will not change that basic pillar. Property remains, for me, the place to invest funds now and in the future.
At the beginning of this year, despite the first two months of stormy weather, do you remember that? (we all complained!) yet the property market in Northern Ireland was having its best start in several years with lots of activity and signs of a prosperous year ahead.
Our current prices remain well below the pre -financial crash (2008) and it looked as though 2020 would be the year to see those differences with other regions of the UK market close. Put simply, we had in the region of 35% to grow in to compared with others.
Why is this different to the financial crash in 2008?
Let’s be honest…
This feels different, this is different!
If you were in property back then, we all made mistakes. We did too! Anyone who was dealing at a reasonable level had at least one bad deal. We had one really bad deal and a couple of smaller ones! They hurt, but they weren’t fatal thankfully.
The truth is we all royally messed things up! Banks, developers, agents, everyone! We all got carried away in a haze of easy credit and inflated values! We all deserved some pain and boy did we get it! It was, in large part, of our own making and now 12 years on, we are at least able to admit that!
This time, we aren’t to blame. Unless we were working in the World Health Organisation (WHO) or leading governments (Get well soon Boris, if you are reading this in St Thomas’ Hospital) we didn’t see this coming and now we are all, as the hashtag suggests “in this together!”. I have other views on that!
As I have been writing this blog the seriousness of the potential economic situation is emerging. The ‘R’ word recession is everywhere. There is talk of the EU project failing. There is talk of output falling by 10% in NI alone. My take on this, is that this is all about the uncertainty of things! Remember Brexit… When we have a clear exit strategy from the measures in place currently, a certain level of confidence will return in my opinion to enable us to switch the lights back on!
MCG Investments – Six Success Steps
I do not claim to be an economic expert and there may be readers who disagree with my assessment, and that is absolutely fine. They may be better qualified and better placed in their fields. For me, what I am absolutely clear on, is that we all need to have a plan to emerge from this! Our plan is forming in my own mind, based on the following:
1. There can and will be no enforced punishment on banks or developers like there was before, for being irresponsible. We will return to normal business in that regard.
2. This is a pause in the market, not a stop, and we are positioning ourselves to press play as soon as social distancing measures are relaxed.
3. The property market is not like the financial markets, it takes time to correct and is not instantly volatile to external shocks. We are planning for a modest dip in the market in the region of 5% initially.
4. We are then planning for a bounce back in values, later in the year when the supressed demand from Quarter 2 (2020) assuming we return to normal life no later than July/August 2020.
5. Interest rates are at 0.10 % and will remain there for a long time until we all assess the damage across our respective industries from essentially switching off the economy.
6. At MCG Investments we see this as a massive opportunity for us and our investors for “sticking to the knitting” in terms of being aggressive in the market investing in property in the short and long term. Post 2008 we were aggressive, but not aggressive enough- lesson learned!
Now you know what we are going to be doing for the rest of this year! What will you be doing?
I hope that you enjoyed my first blog on property. Between the home-schooling, the never-ending kitchen routine and the one daily exercise outing I have really enjoyed writing it. Thanks for reading!
As a follow up, I am delighted to announce that I am hosting a NI Property expert panel Q&A (via zoom) next Thursday 16th April when you can hear first hand their perspectives on the current climate and what the future holds.
Details of this event, including the panel members, time and the link, will be announced on my LinkedIn page @Tanya Mcgeehan over the coming days.
I will finish with this, long before we had an economy, we had a society and always will, so in the here and now, look after yourselves and your families.
Stay safe and well.