Will the Property Market Follow Stock Market Fall?
Will the Property Market Follow the Stock Market Fall?
You could not fail to notice that the stock market has taken a huge dive since it’s all time highs in January. The falls have not been not confined to the FTSE 100 or FTSE 250 but have been worldwide including the Dow Jones the German Dax and the NIKKEI to mention just a few.
Is it a Crash?
There are no signs of a stock market crash at the moment, more, what’s considered a correction following the all-time highs and a return to normal volatility. The reasons are mainly to do with headline news on inflation, possible interest rate rises and higher wages as all of these things impact a companies profits.
In many ways the stock market grew in 2017 much more than anyone had predicted and so it was inevitable that there would be a correction in the markets. This is different to a crash because the worldwide economies are growing and there is strength in the markets. Obviously there are headline cases like the fall of Carillion and profit warnings from some big players but overall the markets remain strong.
Will Property Prices Follow?
Yes and No! The property market is not directly linked to the stock market but it is linked to the economy and the same concerns that affect the stock market do affect the property market. For example, interest rate rises will affect the property market because people have to pay more for their mortgages.
There’s Nothing New Under the Sun
Prices rise and fall in every market and if you are a keen follower of the Property Cycle you will know that we are due a small dip before some big rises so watch this space. In many parts of the UK the market is flat or falling (if you account for inflation) but there are still areas of growth that are bucking that trend. In last week’s blog post I talked about the Midlands but the northeast continues to impress too so all is not doom and gloom.
Government policy has aimed at slowing the property market down and reducing the trend of buy to let growth and this has been somewhat successful. If you follow the property cycle theory though you will know that this was due but there should still be strong growth for some years to come following the slowdown if all remains true to form.
Remember to factor in interest rate rises and the tax changes and make sure that your portfolio is showing a profit overall. Personally, I believe there will be two interest rate rises this year unless Brexit throws a spanner in the works but they will be small and gradual. We have had it good for a long time and bear in mind that interest rate rises are good for savers!
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