What will houses prices do in 2021?
Many people have been asking me about house prices and what’s happening with the prices.
Since January up until now, they've slightly dropped and people are wondering whether the price are about to crash.
Back in 2020, I did predict a crash in 2021 and I think that’s what's happening with the property market right now and the next few months or throughout the end of the year.
We had a rough year in 2020 because of the pandemic and the lockdown as the property market was frozen, and I predicted that house prices would actually go up around June and would be significantly higher than they were in 2021 January.
My predictions were very accurate and that was great, however, I did also predict that in 2021, we were going to see the housing market go down significantly.
Nevertheless, I don't think that house prices are about to go down dramatically and I’ve actually changed my mind.
The reason I’ve changed my mind is because the circumstances have changed and so, what's happened is, everything's been pushed back such as stamp duty holiday and the lockdown.
I think that house prices are going to be stable because the government is pushing for that with the incentives that are in place.
However, I do think that once the furlough scheme is complete and once the stamp duty holiday finishes, the house prices are going to go down as we're going to see a big fall in properties. As I said before, I don't think that's a big deal.
When I was stating my prediction of house prices last year, I was so spot on, something the media usually gets wrong.
Capital Appreciation Doesn’t Pay Bills
People are so obsessed with what our house price is going to do because they are so obsessed with that and think that the way to make money is to buy a house and then wait for it to go up but that's not how you make money in property.
You don't buy a house and wait for it to go up and that's one of the first rules on the property investors crash course since capital appreciation doesn't pay the bills.
When you buy a property, what's important is not what house prices are going to do because you can't predict that for sure and you can't know exactly what house prices are going to do.
If you buy a house for 100 grand and then it quickly becomes worth 200 grand, that 100,000 pounds in equity doesn't pay the bills because what pays the bills is your rent.
Therefore, when you buy property, rather than thinking what it is going to do, go up or down, you're better off and you'll be much smarter renting it out.
If you buy a property for 100 grand and it's paying you a profit of a thousand pounds a month and then drops it's worth to 80 grand but still paying you a thousand pounds a month, are you going to sell it? Of course not because it's giving you a monthly income.
If you buy a property worth a hundred thousand pounds, it’s paying you nothing but costing you, and then it doubles in value, are you going to sell it? Of course, yes. You're going to get rid of it because it's all about cash flow.
Cash Flow is King
When you buy a property, you want to get as much cash flow as possible and the best way to do that is not only buying low and renting high but also buying a property and splitting it up into Hmo, meaning a house of multiple occupancy.
You rent out room-by-room and that gives you cash flow. The great thing about buying properties and turning into an HMO is they're changing the rules as they're bringing article 4 in which means that you're not going to be able to do that anymore for much longer and so, I would highly recommend you find properties that are in non-article four areas.
Not only is that going to give you good cash flow, you're going to have automatic planning permission to run it as a Hmo when article 4 is brought in your area.