Property write-downs
He added that while interest rates are presently very low, this is a function of the uncertain economic environment, and that uncertainty means the loan to value ratios at which individuals can borrow will be lower, which is likely to depress prices in the residential property market.
Most UK commercial banks have taken write downs on the value of their loan books, indicating they expect many people to default on their mortgages.
This has the impact of potentially increasing the supply of houses on the market at a time of economic uncertainty, something which is likely to mean lower prices.
William Buckhurst, head of fund research and investment director at Vermeer Partners says: “We do not normally invest in residential property given that our client base tends to be already very overweight this sector and it is hard to see an immediate move upwards in UK house prices given the inevitable economic recession that is going to follow Covid-19; however, long-term the outlook for UK house prices looks positive given the dearth of supply, changing demographics and low mortgage rates.
"After all, if people are going to be spending more time working at home they are going to require more space. UK housebuilding equities are a good way to play this.”
Most advised clients are overweight property because a significant portion of their wealth is held in the house they live in, and so they are already exposed to the vagaries of the London property market.
Philip Milton, who runs PJ Milton and Co, an advice firm in Devon says: “We endeavour to take ‘everything’ into account with our advice and guidance and encourage as much diversity [of assets invested in] as is possible.
"Investors in property tend to think the risks are non-existent but we do alert them to the issues which can arise and of course it depends too if they have done so on mortgage or full cash which can mean they have too much in a single asset class.
"House prices are very high – over-extended - but they have been for some time.
"At some point though there could be a rude awakening and BTL investors could have a serious shake-out, especially those created on vast borrowings with high Loan to Value.”
Mr Bucher added that the weaker economic environment may mean that fewer people can afford to buy a home, and this is likely to boost demand for private rented property.
