With so much uncertainty in the world today, do you wonder whether you should invest in property during COVID-19… or wait it out?
This is an updated version of a blog I first wrote in April 2020…and even with the news that a vaccine has been found (thank goodness), we’re still living through some very strange times and the presence of Coronavirus seems to be with us in everything we do.
But then, at the same time, the property market is doing fine and still moving along well! We’ve had good sales of tenanted properties over the last few months and property investors are still looking for buy-to-let opportunities.
As the estate agent for landlords we’re laser focused on tenanted property sales in Scotland and here to give you our thoughts on buying during COVID-19.
NOTE: This is a developing situation, so we’re going to be updating this article as more information becomes available.
How has COVID-19 affected the property industry?
Back in March (2020) UK property activity ground to a halt. And then at the end of June (2020), in Scotland, it got going again with a bang!
So, in short, it is definitely possible to progress property deals in the second half of 2020 and I’m sure into early 2021. Some of the cogs are moving a bit slower. But they are still moving.
Below, I’m going to give you a review and update on the challenges faced by the key players assisting you, the property investor, during the COVID-19 pandemic.
Registers of Scotland
Certainly there are no issues now, but back in proper lockdown this is how it unfolded…
It’s a day that is etched in my memory, when on the 24th March 2020, the Registers of Scotland (RoS) closed its offices and effectively ALL sales were put on hold until they could find a solution.
Thankfully, and maybe to their credit, the RoS found a solution and it was from Monday 27 April 2020, that they started to take digital registrations! Which meant it was possible for a number sales to now complete without so much hassle.
For posterity, I thought I also leave this insight from our good contact, and experienced solicitor, Steve MacDonald fromInksters:
“Where there is a willing buyer and seller, sales can still complete during lockdown. As far as registration with RoS is concerned, there is now legislation in place which allows for the extension of Advance Notices until after a period when they start accepting paper applications again.
“If registration is an “emergency” they will accept applications in digital form but will consider on a case by case basis.”
It’s an out of date quote but shows well the mood at the time.
As you probably know, surveyors’ jobs are very much in and out of properties, so most of their work unfortunately came to a halt on March 23rd.
However, they are fully operational now and have been for a few months. Of course, with all the expected safety measures.
Many estate agents – including ourselves – have embraced technology and often conduct viewings virtually; that is to mean the viewer views the property from the safety and comfort of their computer.
All in all, as long as the safety advice is followed, the current legislation in Scotland, even in the strictest levels of lockdown, allows for home-moves to take place and for estate agencies to sell properties.
When I originally wrote this blog, in mid April, some conveyancing firms were doing only the most essential work, whilst others were doing as much as possible to support their property investor clients.
Now, in late November, all solicitors are back to work and are, in fact, busier than ever.
However, it remains to be seen if the opportunity to cast aside some of the older procedures and use a modern tech-based approach has been seized. I hope so.
Letting agents are still working hard. During the lockdown of March, April and May, most staff were furloughed and agents had to adapt. It seems many property managers still work from home and innovations have continued.
There seems to be a lot of regionality in terms of demand for rental properties but over the whole of Scotland the letting agents were snowed under with would be tenants looking for property.
Now, in November, that has slowed but is it the regular slow down for Christmas? Or is it an over supply? I believe it’s the former, and in January 2021, lettings will be busy again with high demand for rental properties.
Banks, mortgage companies and lenders (all in the financial industry) were possibly the hardest hit by the early Covid lockdown, with huge logistical issues surrounding employees working from home – which has been extra difficult due to the tight industry GDPR rules.
They were also dealing with an incredible amount of mortgage payment holiday requests!
All of this led to a general inability to process many existing mortgage offers and certainly lots of lenders had to put a stop to new mortgage applications for those looking to invest in property during COVID-19 – and remove a lot of products.
Things have settled down now but there is no doubt that getting a buy-to-let mortgage has become a slightly more challenging and longer process – which in turn has lengthened the conveyancing process – from the usual 6-8 weeks to more like 10-12 weeks.
Portolio, The Estate Agent for Landlords
Lastly a word about us. Being the only company in Scotland that is 100% focused on selling tenanted property, we have a slightly different set of challenges from your regular run of the mill estate agent.
In the early stages, we were like all others i.e. we couldn’t sell properties! However, I’m proud of the way myself, and fellow co-founder Ross MacDonald, worked hard to be the best company we could be when we came out the other side… as we did in June.
Property investors were then a little slow to become “reactivate” and in early August, I was a little worried about the length of time we would have to wait. But I shouldn’t have worried, as since then it’s been very busy with good sales and people looking to invest in property during COVID-19.
We occasionally hit a roadblock in the shape of a tenant self isolating but, through a caring approach with patience, we’ve always found a way to present the tenanted buy-to-lets in their best light, and attract interest from property investors interested in Scottish property.
We see our way of selling investment property as a huge advantage to property investors, as you can review the video, floor plan and home report plus all the relevant data on rents, safety certs and yields. Often a viewing isn’t needed! It’s very much an informed decision.
To emphasise this I’m pleased to say that we regularly sell property to overseas investors where viewings are just not possible. Click here to viewour properties for sale.
So now you know that the wheels of the property industry are turning, and you can invest in property during Covid-19, we come to your next potential question…
Should you buy investment property during COVID-19?
If you know where to look, it’s certainly not a bad time to find value in the property market; as there are opportunities for savvy investors now and over the next few months.
I commented earlier that the property market came back with a bang – and that’s true, but it was home-buyers. Later I mentioned that property investors did not immediately rush back to their high levels of activity in 2019 and early 2020 and I think the two comments are linked.
Why? Well, it stands to reason that property investors saw this heat in the property market and were not at all keen to get into a bidding war with homebuyers, who will almost always be ready and willing to pay over the odds. So they sat back, and waited – and that could also include you, the person reading this blog.
In my opinion, no property investor should pay 10% above the home report value. You should pay the fair price which is much closer to the home report value and is a price that reflects the rental yield and the potential for capital growth.
Some property investors are concerned about the future economy and how that will affect renters (the lifeblood of buy-to-let) jobs and also property values in the next few years.
Looking to the future is an essential part of assessing any investment and especially unsettled times. It’s essential for you, and all property investors, to pay the right price for buy-to-let flats and houses.
If you pay the right price and your strategy is long term – around 10 years – then buying now, during Covid-19, is a perfectly smart thing to do.
Here are some more points to consider!
Money is still cheap
Lenders are making things a bit harder, but the interest rate is rock bottom and the cost of borrowing is as low as it’s ever been – and is not expected to increase any time soon.
For property investors that leverage their funds, this gives a great return on investment.
Money in the bank is doing next to nothing
Property investment is still a first class way to make your money work hard for you. We speak to many property investors who have funds in the bank, not producing any kind of returns, and they are very happy to continue building their property portfolio right now.
LBTT (stamp duty) reduction until March 2021
As it stands today, Land and Buildings Transaction Tax (LBTT) has been cut by the Scottish Government until April 2021, with all property buyers not having to pay LBTT on properties up to the value of £250k.
Sadly the additional dwelling supplement (ADS) of 4% still applies but it’s still a great boost and does help to save those all important ££ when trying to make money in property.
As a side note, we predict that the LBTT reduction will be extended for a further six months to September/October 2021… but maybe we’re wrong.
Advice from the tenanted property pros
As for tenanted property, there’s been a surge in enquiries from landlords wanting to sell with the tenants still living there – driven largely by the extended notice period.
With that in mind, it’s well worth keeping your eyes peeled for property on our website – click here to view.
Long-term strategy based buy-to-let investments can and should still happen. A dip in property value next year should be considered but not by much and it won’t have a big bearing on your long term goals.
However, if you tend to buy, refurb and sell quickly (known as a ‘flip’) then you do need to be wary of this right now as the immediate future is far more relevant.
If you’re new to investing, now is the time for you to learn, work on your strategy, and take stock. Think about the future – could investing in a tenanted property now pay off a few years down the line?
Communicating with a specialist estate agent, and property experts, will help you take onboard as much advice as you can, so that you can make a more informed decision about what to do right now.
More advice from the tenanted property pros
Our advice is to not wait around and instead to grab opportunities that present themselves. The unavoidable truth is that some sellers may be more flexible and some properties cheaper now than they would have been 8 months ago.
It may seem natural to feel stuck with a certain inertia of uncertainty but try to think forward two or three years. Will you regret not taking those opportunities?
Try also comparing investing in property to a share price, or leaving money in the bank. Interest rates have dropped, the cost of borrowing is going down, and shares are proven to be less dependable than good old bricks and mortar. People understand it.
After all, people will always need a place to live. There’s still a housing crisis in the UK, and therefore the private rented sector has never been more important. Property is still a good way to invest and create financial freedom and wealth.
The best advice I can give you is to speak with property professionals, and specialist estate agents experienced in investment property, who can help you work out your goals, and help you identify properties which would be a good fit for you.
TIP: Specialist estate agents can usually send out regular property alerts via email on the areas and types of properties (including portfolios) you’re interested in, with opportunities that aren’t necessarily available on the open market.
To sum it up…
Thanks for reading. Hopefully this article has given you some better insight into whether or not you should invest in property during COVID-19. The answer is that it’s subjective, and comes down to your goals – both in the short and long-term.
Be more cautious but don’t let uncertainty stop you. Be open to new ideas – maybe new locations to invest in or new types of property with better yields or better capital growth. Have you considered buying a property portfolio even?
Lastly, scrutinise your business plan and ensure it’s robust enough to handle a few more void periods and the occasional lower rental yield than you want or expect – just for a couple of years.
If you’re looking to get some advice on investing in property right now (or in the future), please don’t hesitate to get in touch.
And, most importantly of all, keep a positive mindset and stay safe – of course!
Written by Chris Wood, MD & Founder of Portolio
Get in touch on 07812 164 842 or email email@example.com