Navigating the property landscape, particularly in a city like Lincoln, requires more than just a reactive approach to the daily newspaper and social media headlines.
As homeowners and potential investors are continuously bombarded with alarming whispers of plummeting house prices, coupled with rising interest rates and the heartache of negative equity, there’s a tangible atmosphere of anxiety and trepidation. Yet, the truth we must all embrace is this:
No one can predict the property market with pinpoint accuracy, not even the experts.
Every press release from the Halifax, Nationwide or Land Registry with the merest hint of a downturn or hiccup in the property market becomes headline fodder, often stoking fears and uncertainty. Why do the newspapers and clickbait doom mongers post that?
Because ‘bad news’ sells newspapers!
With interest rates on an upward trajectory, both prospective and current Lincoln homeowners are grappling with pressing questions …
Will the house price decline continue? Is negative equity on the horizon? What of interest rates? Let us dive in on the current state of play.
Lincoln house prices are only 2.1% lower than their peak of December 2022.
(£188,856 December 2022 to £184,909 June 2023 – the most up-to-date data from the Land Registry).
Interesting when compared with a national drop of 1.9% over the same period, with most areas seeing house prices rise in the last two months!
Historically, property prices have exhibited a rhythmic dance of peaks and troughs. A review of housing market trends over decades would reveal this inherent cyclical nature. House price declines are only a prelude to eventual rebounds. This pattern has been the underpinning of the property market for generations.
What of negative equity?
If Lincoln house prices drop by 10%, a small percentage of homeowners (2.83% of all homeowners that have bought in the last two years) will be in negative equity.
Yet, that is only a problem if they decide to sell the property, and as we all know, homeownership is a long-term thing, and most of those who would have negative equity will probably be on five-year fixed low-rate mortgages.
But what if Lincoln house prices dropped from the peak in December 2022 by the same percentage (17.6%) as they did in the global financial crash in 2008/9?
If that were the case, Lincoln house prices would just return to the Land Registry house price levels achieved in September 2020 (£154,385) – and nobody was complaining about those! (Although the number of people in negative equity would increase slightly).
As Lincoln homeowners face uncertainty regarding potential house price drops, it is crucial to recognise the numerous factors that support the housing market’s resilience. While economic conditions can fluctuate, history has shown that housing values tend to appreciate over the long term.
Lincoln homeowners can also take comfort in the differences between the 2023 market and the 2008 housing bubble, including stronger equity positions and a more regulated lending environment.
So what does the future hold for Lincoln homeowners?
For homeowners in Lincoln, it’s crucial to understand the broader context. Global economic dynamics, national policies, regional developments, and local demand-supply dynamics all play pivotal roles in determining property prices.
As such, while short-term market shifts are inevitable, they don’t necessarily define the long-term trajectory of property values.
Moreover, property should often be viewed as a long-term investment.
While the temptation to make quick decisions based on current trends is strong, it’s vital to consider the bigger picture. Remember that property isn’t just an asset; for many, it’s a home, a place of memories, and a cornerstone of family life.
The mortgage interest rates of 1% to 1.5%, that we saw up to 18 months ago, are not going to return. Yet looking at 5-year swap rates, the money markets are predicting (with billions and billions of pounds of their own money at stake) that UK interest rates will come down significantly over the next 5 years from their current levels of around early 6%.
There is a saying in property – “Marry the house, and date the interest rate”.
It simply means you are committing to a long-term relationship with the house you love. Yet you can dump the interest rate when you re-mortgage. The idea is that when you find the house you love, you buy it, with the anticipation that you will be able to refinance later when interest rates drop.
Diving into the archives of property history, one witnesses a tale as old as time: a fluctuating market characterised by peaks and troughs. Like the ever-rolling waves of the sea, property prices rise, fall, and rise again.
Such is the cyclical nature of housing markets worldwide, and Lincoln is no exception.
For the residents and homeowners of Lincoln, understanding the broader tapestry of property dynamics is paramount. Consider these vital elements:
- Global and Local Economic Factors: Lincoln’s property market, though unique, doesn’t exist in a vacuum. International economic shifts, national fiscal policies, regional developments, and even local events play decisive roles in shaping property prices. A short-term dip, as mentioned above, does not foretell a long-term decline or house prices crashes as seen in 2008.
- The Long Game: Traditionally, owning property is a marathon, not a sprint. Quick, impulsive decisions, driven by panic or greed, rarely bear fruit. Instead, a more measured, patient approach, considering the property’s long-term potential, is often more rewarding.
- Lincoln’s Rich Tapestry: With its historical charm, coupled with an array of property types ranging from vintage homes to contemporary modern brand-new homes, Lincoln offers resilience against sweeping market downturns. This diversity provides both stability and opportunity.
- Infrastructure & Growth: Lincoln’s ongoing development and infrastructural projects often lead to a long-term appreciation of property values, countering short-term market fluctuations.
- Rental Prospects: A potential silver lining during market downturns is the rental market. Lincoln’s strategic location, history, and vibrant community make it a perennial attraction for renters. For Lincoln homeowners, this can translate to a steady income stream even if the sales market looks less favourable.
- Historic Resilience: A glance at Lincoln’s past reveals a property market that has not only weathered numerous economic challenges but often emerged stronger and more robust. This resilience speaks volumes about its inherent potential.
In weaving through the property labyrinth, homeowners and investors in Lincoln must cultivate a panoramic view. While it’s easy to get swayed by the market’s immediate waves, one must remember the vast seas and ocean beyond. The short-lived troughs are merely precursors to the next crest.
To truly succeed in Lincoln’s property domain, it’s less about reacting to today’s noise and more about tuning into the timeless melodies of history, patience, and informed foresight.
If would like a chat about where you sit in the Lincoln property market, do not hesitate to give me a call or drop me a message on social media.
