Chart analysis suggests we could see a property market bounce as early as February
UK house prices appear to be stuck in a downtrend right now, with analysts predicting another 10% lower, unlikely to recover until 2025. Halifax has stated that prices will have fallen 5% over the course of 2023, with a further 2.5%+ predicted in 2024.
Higher borrowing costs are the main instigator for the prevailing conditions, but despite all this, there may still be one glaring opportunity lurking in the background.
Firstly, let us turn our attention to the UK real estate market from a ‘technical’ point of view.
Technical, or chart analysis, is widely used in financial markets as a way of analysing and predicting future price action, achieved through the study of past market data, primarily price action and volume.
This data is presented as a chart, which can be displayed in many ways, typically decided by the analyst’s personal preference, the main goal being to understand the trends over different time periods.
Below shows the UK real estate market as a chart, which is interesting for several reasons.
We can see clearly the long-term trend that the UK market has followed over the last 40 years, with distinctive highs and lows that clearly fit the blue trend channel. Within this channel, since around 2013, the market has formed a shorter-term trend (yellow channel).
Stick with me.
We must concern ourselves with these trends when trying to pick future price action as they follow reality, rather than a ‘best guess’ approach. If the market holds this trend, according to the analysis, we could see a bounce as early as February.
Should markets defy the clear ‘support and resistance’ lines, which are the channels themselves, that would create a confirmation of a change in the direction of the market.
You can apply these studies to anything that is directly related to human behavior – like currency markets.
Since the beginning of July (yellow channel), GBP has struggled to hold on, losing over 11% against USD, but as you can see, GBP is still in an overall uptrend (blue channel), which it has been in since the chaos of the Truss debacle.
Like our real estate chart, we are at a pivotal turning point. Should the market continue its long-term trend (hit the lower blue line and trade higher), we could be in for a major Sterling recovery.
What’s your point?
Nearly 50% of PCL investors are international, and whilst we are essentially talking about the buying and selling of places to live, the investment angle is arguably the leading factor in a lot of decision making.
Overlaying these two studies provides us with some objective analysis in terms of key turning points in the markets, possibly taking out some of the guess work.
Waiting on the sidelines for prices to drop might seem like a strategic move, but it’s essential to weigh in the currency factor, especially for international buyers. Exchange rate fluctuations can significantly impact the true cost of the investment, sometimes negating the savings made on property prices.
Instead of trying to time the markets, focusing on the enduring value of London real estate and the long-term benefits it brings, is surely the better trade. After all, a wise investment is not just about the price you pay, but the value you gain over time.
The market in numbers: International investor spending £5mn
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