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What impact will new Prime Minister Rishi Sunak have on the UK property market?

This is an interesting time for the UK property market. Interest rates are higher than they have been for decades and the increased cost of living has many questioning whether now is the right to continue putting money into property. Investors and homebuyers are faced with new questions on what seems like a daily basis at the moment. Now, the new Prime Minister, Rishi Sunak MP, and his team will have to act quickly to calm the market and restore the economic confidence that everyone needs. The initial reaction of the markets to the announcement that Sunak would be the Prime Minister were positive. Pound Sterling (GBP) rose slightly following the recent fall caused by the disastrous economic policies of the previous Prime Minister, Liz Truss. While it was pushed back down slightly by a strong Dollar, we can take this as a sign that the markets have more confidence in Sunak. Likewise, the gilt markets rallied following similar troubles, and investors in those saw yields rise accordingly. As noted by Oliver Shah, Associate Editor of the Sunday Times, this included five-year swap rates that are of particular interest to property investors. This is the rate of interest payable on some long-term financial transactions like property, and it had ballooned to more than 5% under the previous administration. The news of Sunak’s victory pushed it down sharply to just over 4.6%, which is good news for the property sector as a whole. Lawrence Bowles, director of research at Savills, agrees with this positivity, saying: “The uncertainty of the last few months has had a material impact on gilt rates: the rate at which the UK government can borrow. In turn, this impacts the cost of borrowing for the rest of us. It affects mortgage rates for home buyers, development debt costs for housebuilders, and refinancing costs for property investors. “Anything that helps bring certainty and confidence back to the market is likely to reduce borrowing costs. That, in turn, will reduce affordability pressure for households securing mortgage finance, for housebuilders starting on new sites, and for investors buying and operating homes for rent. So, it is clear that Sunak’s appointment as Prime Minister has delivered some immediate benefits for the housing market that investors should take note of. The confidence he inspires in the market has settled the worst of the nerves, and the upcoming Budget at the end of October offers Sunak and his new team an opportunity to further embed certainty into the markets once more. While it is impossible to know exactly what will be in that Budget, it is reasonable to predict that housing will be a major focus. We are likely to see additional clarity around housing policies – including rental reform, cladding, planning reforms and more – as the government attempts to return to ‘business as usual’. This is likely to be welcomed by the markets, and it would not be a surprise to see borrowing costs fall again as confidence returns to the national economy. However, as noted by Tom Bill, head of UK residential research at Knight Frank: “Falling borrowing costs will support demand and transaction volumes in the UK housing market, but this should be seen in context. Mortgage rates may come down compared to the period following last month’s mini-Budget but a 12-year period of ultra-low borrowing costs is over. As demand subsides, 18 months of double-digit house price growth will also come to an end.” On the surface, the end of double digit house price growth sounds like a definite downside for property investors. It is true that a reduction in house price growth will cut profits – but is it all negative? For a start, there are suspicions that ongoing house price growth at this level will eventually lead to a much larger crash, and that is something all investors will surely wish to avoid at all costs. Secondly, property investment is most successful when entered into as a medium-to-long-term prospect. A slight reduction in annual growth is not necessarily a negative if it leads to a more sustainable sector which delivers high returns for longer. Indeed, overall confidence in the market appears to be as strong as ever, even before Sunak’s promotion to Prime Minister. Research carried out by Yopa over September and October 2022 – the worst of the economic crisis – shows that people’s faith in housing remains unshaken. Despite conditions being the worst they have been for decades, more than 46% of respondents thought it was a good time to buy more property, and more than 57% had confidence that house prices would continue rising regardless. This level of confidence is almost unprecedented in today’s economy and it speaks to a market underpinned by sound fundamentals.   The overall lack of available supply will continue propping house prices up, and that situation is unlikely to change given that current building levels create a shortfall of tens of thousands of homes each year. It is to be expected that further clarity from Sunak’s government will continue to increase confidence in the market. Even if borrowing rates remain higher than expected for the short term, a Sunak government can gradually bring those back to more reasonable levels as normality is restored over time. What does this mean for investors? If the UK property market fundamentals of demand being far higher than supply stay true as mentioned above, but the current market situation is not ideal, there is one obvious course of action. By investing in off-plan property in the UK that is still under construction, you can make the most of a market that is still performing extremely strongly and avoid the worst of the current economic conditions at the same time – the best of both worlds. Whether you are paying in cash or with a mortgage, you will not have to provide the majority of the funds until the property is complete. This gives interest rates and the mortgage market time to return to more a more favourable state for you, while at the same time your property will be generating capital appreciation as construction goes on. By investing off-plan in a strong, growing market with future potential such as Manchester or Birmingham you can buy at what will end up being a below-market price and maximise your returns. At the same time, you will minimise your costs by waiting out the current tough economic moment and borrowing when rates are better. Want to learn more about investing in off-plan property in the UK? Get in touch with your team today for more information by clicking here.
Sanjit Dhanjal
25th October 2022

Cladding guidelines for investors

One of the most pressing questions facing buy-to-let landlords in the UK concerns cladding. This is the biggest story in the industry and it is attracting a lot of attention as many people – including landlords – are beginning to face mounting bills and increased uncertainty due to a problem they did not cause. Is the UK cladding scandal all bad news for landlords? Or are there some potential positives too? Why is cladding such a big issue at the moment? Cladding is the process of adding an extra layer to a building which can protect it better from the elements or increase its insulation rating. The Grenfell Fire disaster made it clear that not only is a lot of existing cladding ineffective, but it is also flammable and often dangerous to life. This has led to a rush to replace flammable cladding on high rise and other buildings before another tragedy occurs. In practical terms, this means that expensive retrospective work is being carried out on buildings across the country and there has been a huge row over who is paying for it, with developers trying to make leaseholders pay to fix a problem they did not cause. What new cladding legislation has been brought in? To help leaseholders combat this issue, avoid unfair fees and get unsafe cladding removed from their properties, the government has brought in the Building Safety Act 2022. This will protect leaseholders in law for the first time and prevent the costs of replacing unsafe cladding being payable by them. Instead, the Secretary of State at the time the law was written, Michael Gove, has shifted the burden onto the developers and freeholders. Put simply, those responsible for installing dangerous cladding and those who own the buildings will be required to fund essential repairs. This applies to all buildings over 11 metres in height, although campaigners from the End Our Cladding Scandal group have questioned why it does not also apply to buildings under 11 metres in height. This is an ongoing issue that will also need to be resolved in future. The bill also opens up a new phase of the Building Safety Fund (BSF) – a £5.1bn pot for the next 10 years to fund the removal of dangerous, flammable cladding from buildings. Gove said the Building Safety Act 2022, “marks a major turning point for building safety in this country, as we introduce a tough new regime to make homes safe and help rid the sector of bad practice once and for all. “Hundreds of thousands of innocent leaseholders now have the legal protection they rightly deserve, freeing them from a financial burden they should never have faced.” How does the cladding crisis affect buy to let landlords in the UK? Landlords were initially excluded from the list of leaseholders who could apply to the Building Safety Fund and were expected to cover all costs themselves. Later on, this was amended to say that landlords who owned two or fewer properties would benefit from a cap on how much they could be asked to pay. This still leaves portfolio landlords with huge potential costs and it is the unfortunate truth that these people will face mounting costs as they have to replace cladding under the new laws. There are multiple stories of larger landlords facing bills for tens or even hundreds of thousands of pounds. The cladding scandal also offers landlords of properties clad in flammable material a range of other problems, including: Remortgaging to a lower rate is impossible as most lenders will not loan you money Properties drop hugely in value Almost impossible to sell and exit the market Renters may be unwilling to move into blocks with fire safety issues What can buy to let investors do to limit the impact of the cladding crisis? The process of working out how the cladding scandal in UK property will be solved is still ongoing. In the meantime, there are some types of landlords who will benefit, and a strategy to take for your next investment that will help limit your exposure. The first group that could benefit are smaller or new landlords who will only have two or fewer properties in the same building. As mentioned above, the Department of Levelling Up, Housing and Communities has specified that cladding relief will be available to these buy-to-let landlords in the form of a cap on the cost of cladding work - £10,000, or £15,000 in London. This will help smaller landlords keep costs down and incentivise new landlords to keep investing in a limited number of properties. The second group are those landlords who purchase new build properties. New developments will have to meet the new, higher standards of cladding in order to complete and will therefore not come with any concerns about flammable cladding. Similarly, the fact that new build developments are known to not include flammable cladding will also make them more attractive to potential renters. Furthermore, when you choose to sell your property, you will not face any issues selling it in the same way that landlords caught up in the cladding scandal have. Your investment is therefore more protected and future-proof, particularly if you buy an off-plan property which is currently in construction as that will be using the most up to date materials. Want to find out more about our brand new buy to let investment opportunities? Get in touch with our team today by clicking here.
Sanjit Dhanjal
28th September 2022

How do EPC regulation changes affect landlords?

An Energy Performance Certificate (EPC) must be provided as part of every property purchase in the UK according to the law. It measures the energy efficiency of a property on a scale of A-G and gives detailed information about its sustainability and carbon emissions. In April 2018, new Minimum Energy Efficiency Standards (MEES) were introduced which made it a legal requirement for all privately owned properties to have an EPC rating of at least an 'E' before they are sold or let. This legislation applies to both domestic and commercial properties, although there are some exceptions around properties which are Listed and therefore may not be suitable for energy efficiency works. However, it applies to 98% of residential properties in the UK and as a landlord you should assume that you will need to achieve an EPC rating of at least E. Those who fail to meet this standard could be charged up to £5,000 for each residential property. In future, these regulations are set to become stricter as the need to increase the sustainability of the built environment becomes more urgent. New government legislation means that all residential properties which are rented out will need to achieve an EPC rating of C or above by 2025. If they do not do so, they are not eligible for rent. Similarly to previous legislation, this will first be applied to all new tenancies by the initial 2025 date and then be expanded to all tenancies including existing ones by 2028. The final thing to note is that the penalty for not having a valid EPC will increase from £5,000 to £30,000 from 2025. What is the effect that this legislation will have on landlords? Clearly, it will increase the responsibility on landlords with existing properties – especially those with older properties. These could require a serious amount of retrospective work to bring them up the standard required to meet the required EPC ratings by 2025. A whole package of works could be needed including better insulation, remedial structural works, a new boiler, improved windows and other possibilities. These have the potential to be very expensive and it is recommended that landlords take action sooner rather than later. However, there are notable upsides to increasing the EPC rating of your property too. Notably, the evidence points to higher EPC ratings leading to a sales premium and higher rents. These are the two income streams available to landlords and increasing them is the primary target for a successful portfolio that is profitable in the long term. Andrew Harvey, senior economist at Nationwide, agrees, stating: “Decarbonising and adapting the UK’s housing stock is critical if the UK is to meet its 2050 emissions targets, especially given that the housing stock accounts for around 15% of the UK’s total carbon emissions. With this in mind, we used our house price dataset to explore the extent to which owner occupiers pay a premium or discount for a home due to its energy performance rating. “Our analysis suggests that a more energy-efficient property (rated A or B) attracts a premium of 1.7% compared to a similar property rated D - the most commonly occurring rating. There is a more noticeable discount for properties rated F or G - the lowest energy efficient ratings. Indeed, an F or G rated home is valued 3.5% lower than a similar D rated property.” Harvey also notes that the value that people attach to energy efficiency is likely to change over time, especially if the government takes measures to incentivise greater energy efficiency in future to help ensure the UK meets its climate responsibilities. Overall, it is estimated that the average cost of upgrading an existing property to an energy efficiency rating of C is approximately £8,000 – and that number goes up if it is currently rated in band F or G. That is a serious outgoing which will have a major impact on landlords in the future who will have to find that money in order to meet their legal requirements. If they do not, they cannot rent the property out and it will become increasingly harder to sell it. With that in mind, many landlords are wondering what the solution is and whether they should continue investing. While it is a large issue, there is a simple way to avoid the issue entirely when making new investments in future – and that is to buy new build properties rather than existing ones. Over the past decade, energy efficiency measures have improved significantly in all areas and are now being incorporated as standard into new properties. Improved insulation, more efficient boilers, electric panel heaters, decentralised energy and more sustainable building materials are just a few of the sustainability features that new build homes typically include in 2022. Due to this, new build properties will tend to have a much higher EPC rating than existing properties. Approximately 94% of new builds are rated at band C or above, and therefore they are cheaper to run and more attractive to tenants. Additionally, they will retain their value and be future-proof in this way against further legislation changes for many years to come. Looking for your next investment? Get in touch today to learn more about our available properties which all feature a high, legislation-proof EPC rating. Click here to contact us today.
Sanjit Dhanjal
28th September 2022

Cost of living crisis unlikely to affect UK house prices

Britain is facing a cost of living crisis unlike anything else in living memory. Inflation is at a very high level and energy companies are raising prices despite making huge profits – both of which are playing major roles in squeezing the spending power of millions of households up and down the country. This situation was compounded by news this week that the energy prices are set to double again by the end of the year. With government action non-existent and all support delayed due to the Conservative Party’s latest leadership contest, more people than ever before are looking at an uncertain future. This situation has left many wondering about the state of the overall economy and whether its reliability should be called into question. One area that is proving to be resilient in the face of the cost of living crisis is the UK property market, and perhaps here we can see that there is some potentially good news for many people. The latest figures from the Nationwide house price index show that annual house price growth actually increased in August to 11%, from 10.5% in July. Prices rose by 2.1% in total month-on-month when seasonal changes are taken into account, and overall prices are now 13% higher than they were in 2019 before the COVID-19 pandemic began. Robert Gardner, Nationwide's Chief Economist, said of the figures: “The bounce back in August is surprising because it seemed more likely that the tapering of stamp duty relief in England at the end of June would take some of the heat out of the market. Moreover, the monthly price increase was substantial – at 2.1%, it was the second largest monthly gain in 15 years. “Lack of supply is likely to be a key factor behind August’s price increase, with estate agents reporting low numbers of properties on their books.” With that lack of supply in mind, how might the market react as the cost of living crisis deepens? It is fair to say that the outlook is still cloudy, though the housing market’s fundamentals remain strong. Underlying demand is likely to stay strong in the near future as the basic principles of supply and demand remain in place. There are nowhere near enough homes being built to meet demand and that won’t change in the foreseeable future. Due to this, prices in the housing market are likely to retain stability and growth prospects. Likewise, the employment market has remained resilient and this has also contributed. Employment rates are at their highest in decades (over 75%) according to figures released recently by the Office for National Statistics, and that has given more people the kind of certainty that is needed to contemplate a new property move or purchase – leading to a stronger market. However, it is worth noting that some experts believe these conditions may ease slightly in the near term. If the cost of living crisis does cause people to cut their spending the housing market will be affected briefly and some sellers may be forced to lower prices to accommodate this reality. Likewise, there is a danger that the crisis will have an impact on the affordability of new mortgages thanks to the growing rate of inflation. This will also potentially have a negative effect on the market which people should be wary of. However, despite this, a potential slowdown is far from assured and is only speculation at the moment. Indeed, the past behaviour of the housing market and people buying property in the UK suggests that fears could be overblown. The aforementioned factors which are serving to increase the value of property in the UK – especially the lack of supply and the accompanying low rates of new construction – are long-term factors which are not going to be resolved. This should give confidence in the housing market through any possible tough times in the short term. Whether we look at Brexit, the COVID-19 pandemic, increasing inflation or government uncertainty, one of the central facts of life in the UK is that the housing market has remained stable. While nothing in life is ever completely certain, the property market’s reliability is more certain than most, and that remains the case even in the face of a cost of living crisis. Are you looking for your next property in the UK? Find out more about the market and our available buy-to-let opportunities by getting in touch with our team today. Click here to get in touch today.
Sanjit Dhanjal
28th September 2022

Is the abolition of ground rents good for investors?

Investing in UK property comes with a range of additional costs that investors must take into account like taxes, management fees, service charges and more. Of all these extra costs, the most contentious in recent years has been ground rent. Currently, if you own a long lease on a property in the UK – as is often the case when buying a new property under a leasehold – you will normally have to pay an annual fee to the owner of the freehold. This is known as ground rent, and the amount will vary depending on the terms of the leasehold you have purchased. Ground rent rates can be fixed or they can escalate, and the latter scenario created a situation where buyers were trapped in leaseholds where the cost was doubling every five or 10 years as part of the purchase agreement. This created financial hardship for many new buyers, and in 2017 the Council for Mortgage Lenders Handbook was revised leading to some lenders refusing to lend on properties where the ground rent exceeded 0.1% of the value of the property. This made it harder to buy and sell properties, threatening to push owners into negative equity and signalling that ground rents were getting out of control. Now, the government has acted to combat this problem and provide a solution. Ground rents are a cost that does not provide a service, making them unjustifiable, and so these charges will be banned on most new leases purchased after 30th June 2022. The Leasehold Reform (Ground Rent) Bill 2022 is expected to lead to more transparent home ownership for leaseholders in the future.  It will restrict ground rents on long leases of flats and houses to a token peppercorn rent each year – to all intents and purposes, the value of peppercorn rent is zero. What does the ground rent abolition mean for property investors? For those considering their next investment in UK property, the abolition of ground rents should be at the forefront of your mind. The removal of ground rents on new leases should automatically move new-build properties to the top of your list due to the inherent benefits you will receive. As mentioned previously, the Act will apply only to new leases, meaning that all properties in new-build developments qualify and purchasing one of these will mean that you are exempt from paying ground rents in the future. Crucially, it is important to note that the legislation will not apply retrospectively to existing properties with leases that are already signed and in effect. The government notes that some existing freeholders are changing existing agreements to remove ground rent stipulations in light of the new law, but this cannot be guaranteed as it relies on the goodwill of freeholders – something that has not traditionally been forthcoming. In effect, this creates a two-tier market. On the one hand, you will have new properties with effectively zero ground rent costs, and on the other, you will have existing properties which will continue to have ground rents which could cost you hundreds or even thousands of pounds a year. Furthermore, as all new properties will have ground rent costs removed, selling an existing property which does require these payments will only become more difficult. By purchasing an existing property rather than a new build, not only will you potentially pay more during your ownership period thanks to ground rent, but you are also more likely to lose out when you come to sell it, cutting into your potential capital appreciation. One of the main strengths of UK buy to let investment is its dual income stream – monthly rental income and capital appreciation upon sale. By purchasing an existing home with ground rent costs rather than a new build without it, you are in danger of creating an inverse, negative version of that for yourself. Existing properties which are already operating as investments will continue to have some advantages over buying new-build or off-plan. For example, there is a degree of security in buying a property that is already complete and tenanted. However, the abolition of ground rents on new-build properties is good for investors overall and acts as yet another incentive to buy a new property. The benefits are clear, and the Leasehold Reform (Ground Rent) Bill 2022 offers investors a way to cut their costs and increase their profits by investing in new-build property. Want to invest in UK buy to let property? Get in touch with our team today and find out more by clicking here.
Sanjit Dhanjal
29th June 2022

Should you invest in UK property during a recession?

The UK economy proved to be more resilient than many anticipated during the covid-19 pandemic. It bounced back impressively over the second half of 2021 which left many looking ahead positively to the future. The latest figures from the Bank of England suggest that the picture might not be quite as good as we had initially hoped. The cost of living crisis is well documented, as is the ongoing issue with energy prices which is contributing to that. The combination of both is putting pressure on household spending and having repercussions in the wider economy. Looking at the bigger picture reveals some concerning numbers. The UK manufacturing and servicing sectors have both contracted further than expected thanks to the cost of living crisis, and this has been a major contributor to predictions that the UK has entered a technical recession – a period of two quarters of negative economic growth. Earlier in May, the Bank of England predicted that the economy would contract in the final three months of 2022 as the cost of living sees households cut their expenses. The Bank further forecasts weak quarterly growth in 2023 and a contraction as a whole next year. It predicts a fall in GDP of 0.25% next year and a consequent small rise in unemployment. Thomas Pugh, an economist at RSM UK, says in the Financial Times that the projected slump “is a clear sign that the economy looks set to worsen after contracting by 0.1 per cent in March and increases the chances of a bigger fall in the second quarter and of a recession this year”. This situation is viewed by the market as likely to lead to further rises in inflation over the rest of 2022. Indeed, the Bank of England has indicated that it expects to increase the base rate of interest further in an attempt to combat rising prices from its current level of 1.0%. So, what does this mean for property investors? Put simply, it could be the ideal time to speculate and invest for long-term gains, even if the short-term economic picture may look less promising. We have argued previously that rising inflation rates can offer some advantages to investors. Overall, the benefits of investing, and the income on offer, is potentially a lot higher than any inflation or rise in the base rate of interest. The reality is that UK property has proven itself to be one of the most resilient and reliable assets on the market time and time again. Property prices and rents remain on an upward trajectory, and the underlying situation regarding a lack of new supply is no closer to being solved. That is a point in favour of investing despite any rise in inflation caused by the economy performing less well than predicted. The second question that property investors need to be aware of is: if the UK does enter a recession, will it cause house prices to fall? The theory behind that question makes sense. We are already seeing households spend less due to the cost of living crisis, and a recession would further decrease the amount of money on hand – potentially reducing the number of people looking to move house or rent a new property. Housing is a big purchase after all. This would theoretically reduce competition in the market, causing prices to potentially fall. While this is true to some extent, the reality is that there is such a shortage of available housing in the UK that a fall in the number of buyers may not affect the market all that much. There is an annual shortfall of more than 100,000 new homes when construction rates are compared to demand. This leaves a huge backlog which is the foundation of rising house prices – as Halifax noted in April, prices have risen for 10 consecutive months and by 10.8% overall in a year. While the potential for a temporary recession appears to have cooled some demand, the underlying fundamentals have not changed. This could even end up being an opportunity for investors. There is no prospect of the millions of additional homes the UK needs to be built in the foreseeable future. This ensures that demand is likely to remain for years to come, and that there is potential for investors to get ahead of the game and invest while the market slows in anticipation of a future upturn. “For now, at least, despite the current economic uncertainty, the strong increases we’ve seen in house prices show little sign of abating,” said Russell Galley, the managing director of Halifax. “Housing transactions and mortgage approvals remain above pre-pandemic levels, and the continued growth in new buyer inquiries suggests activity will remain heightened in the short-term. The imbalance between supply and demand persists, with an insufficient number of new properties coming on to the market to meet the needs of prospective buyers and strong competition to secure properties driving up prices.” Want to learn more about investing in UK property? Get in touch with our team today for more information about the best UK property investment markets, our available properties and how you can start making your next investment today. Click here for more.
Sanjit Dhanjal
29th June 2022

Why invest in the Birmingham property market?

Birmingham enjoys a strong reputation among property investors. The UK’s second city is a huge national success story, home to more than one million people, as well as thousands of multinational businesses and innovative start-ups. It has emerged strongly from the covid-19 pandemic and is in a prime position to continue growing and lead the way in the future. As the host of the 2022 Commonwealth Games, the city is about to receive an unprecedented level of attention and a huge economic boost. Not only will the Games bring an additional 4,526 jobs to Birmingham in 2022, but it's estimated that an additional 950 jobs will be available annually thereafter according to figures from the University of Birmingham. Overall, the impact of the Games is set to be a £1.2bn annual uplift. Aside from the Games, Birmingham is enjoying the benefits of other large-scale investment and regeneration projects. A number of commercial developments across the city are creating thousands of new jobs bringing substantial economic benefits to the people of Birmingham. To give just a few examples, the 20-year Big City Plan, the Smithfield Masterplan, Paradise Birmingham and more are all underway and changing the face of the city. Together, they are set to add billions of pounds to Birmingham’s economy and create tens of thousands of new jobs. Furthermore, they will make Birmingham an even more attractive place to live by improving infrastructure, quality of life and the city’s sustainability credentials. These, and other major investments like the HS2 high-speed rail line which will slash journey times to London, are putting the focus on Birmingham as one of the UK’s most popular investment destinations. Birmingham is also a global centre for higher education. More than 60,000 students from around the world come to the city each year and contribute significantly to the city’s economy, as well as adding to the demand for city centre housing, both during their education and afterwards as graduate workers. Its nine universities are headlined by the University of Birmingham which is one of the UK’s top institutions. Most recently, it was named the 19th best university in the country by the Complete University Guide league table for 2022, with 18 of its departments ranked in the top 10 for their areas of study. In addition to the large number of students, the aforementioned infrastructure and commercial developments are also driving population growth. The latest published figures from the Birmingham Demographic brief show that the city’s population is scheduled to reach more than 1.2 million by 2038 – representing growth of 7.8%. Development of residential property in Birmingham is not even close to keeping pace with this. The Deloitte Birmingham Crane Survey 2022 shows that just 4,720 units are currently under construction in Birmingham, and are to be delivered over a five-year span. This follows 2021 where the volume of units delivered fell by 26%. In contrast, it is estimated that Birmingham needs at least 4,000 new units every year – creating a supply and demand imbalance that is reflected in house price growth projections. JLL believes that Birmingham is the city which will see the highest level of house price growth in the next five years, with the average property value increasing by 27% by the end of 2026. The agency also projects rental growth of 14.8% in the same time period driven by the same lack of supply. This follows a year period where Birmingham house prices rose by 8.2% in the aftermath of the pandemic, according to Hometrack. Not only does this put Birmingham ahead of other cities in the country, but it is also set to perform more strongly than the West Midlands region that surrounds it. The latest long-term property forecast from Knight Frank shows that the West Midlands as a whole is expected to see average property value growth of 14.2% by the end of 2026 – almost 13% lower than the city of Birmingham itself. Birmingham is one of the UK’s biggest and best cities, and a whole range of factors are combining to put its property market at the top of the list for investors in 2022. If you are looking for the next UK property hotspot, Birmingham is the place to be. Want to learn more about investing in Birmingham property? Get in touch with our team today by clicking here.  
Sanjit Dhanjal
29th June 2022

UK house prices keep on rising

House prices always dominate the news in the UK, but recent events have made the property market even more prominent than usual. The last two years have seen runaway house price growth despite a pandemic, war in Ukraine and now a cost of living crisis and growing inflation which has caused many to ask whether the market can continue to grow. It is against this backdrop that we must see the market and judge its health rather than simply look for new record prices every month. When looked at in the long term, the health and resilience of property is remarkable. Many, including Savills, predicted that house prices would fall “5%-10%” when the market reopened following the first Covid lockdown. This assessment was based on the theory that people would be reluctant to spend and have less disposable income following that life-changing period. Instead, the pent-up demand was much higher than expected and the market flew out of the gates. Today, the average asking price for UK properties is £367,501 according to Rightmove in its latest market analysis. This equates to a 2.1% monthly increase, a rise of more than 10% in the last year, and the fourth consecutive month in which prices have hit a record high. Asking prices are now £55,000 more than they were before the pandemic began. This long-term health is backed up by figures from Halifax. The bank’s data shows further growth in April which took prices to more than 12% higher than they were a year ago. Russell Galley, managing director at Halifax, said: “Housing transactions and mortgage approvals remain above pre-pandemic levels and the continued growth in new buyer inquiries suggests activity will remain heightened in the short term. “For now, at least, despite the current economic uncertainty, the strong increases we’ve seen in house prices show little sign of abating.” With the above in mind, it’s fair to wonder whether the cost of living crisis, rising inflation and continuing economic uncertainty are having any negative effect on the market at all. It seems to make perfect sense that a degree of volatility combined with people having less disposable income should have a cooling effect – so what’s going on? As Tim Bannister, director at Rightmove, said: “People may be wondering why the housing market is seemingly running in the opposite direction to the wider economy at the moment." “What the data is showing us right now is that those who have the ability to do so are prioritising their home and moving, and the imbalance between supply and demand is supporting rising prices." This gap between supply and demand is the basis of the UK property market’s strength, as we have discussed previously. However, it is also true to say that the pent-up demand in the first phase of lockdown was never going to last forever – so where is the continued demand coming from that is keeping prices, sales figures and enquiries so high despite a predicted “cooldown”? The latest data from Nationwide shows that mortgage approval figures reached 70,700 in March. Although this was a slight fall from the previous month, remained above the immediate pre-pandemic average of 66,700 a month. The answer to the demand question posed above appears to lie in the large group of people who did not move immediately after the lockdowns and pandemic eased, but were instead waiting to become more comfortable with their new working patterns before taking the plunge and looking for a new home. In this way, these people are acting as a second wave of pent-up demand which remains unsatisfied, and therefore keeping pressure on the housing market higher than before the pandemic. This might have several implications. Firstly, it could somewhat blunt the impact of the cost of living crisis on people’s willingness and ability to buy homes. One of the big lessons from the first wave of buyers following the pandemic was that the new work-from-home pattern that has become normal led to many people moving out of London and heading to other, more affordable and more desirable areas. Without the need to commute, areas like the London Commuter Belt towns which offer better value for money and an improved lifestyle suddenly became more popular. Likewise, other cities like Birmingham and Manchester saw an increased number of new arrivals as people left the capital to make their money go further. With the cost of living crisis underway, people who work from home are likely to continue seeking this value for money, and it is possible that demand in those aforementioned areas will keep growing as a result of this. The second major trend we saw in the first wave of post-pandemic moves was that people prioritised private space more than they had previously. Whether that means moving to a studio on their own or upgrading to a larger one-bed apartment, greater weight was put on quality of life and having the space to really live than it was previously. This was reflected in people’s decisions when it came to both buying and renting. Luxury apartments were a big beneficiary and could continue to be so as the second wave of demand hits. The above points may provide the answer to why any ‘cooling’ of the housing market we see is unlikely to be either severe or long-term. The first wave of post-lockdown demand pushed the market to new heights, but it does not appear to have exhausted demand by any stretch of the imagination. Consequently, while factors including the cost of living crisis, inflation and the economy may have an effect on prices, this must be viewed in the wider context. The ‘cooling’ that people are predicting or expecting is based on a market that is at a substantially higher point than at any time previously, and so any minor downturns are relative. The value of the market overall is still a lot higher than it was pre-pandemic. For these reasons, we would advise investors to be cautious, yes, but not disheartened or put off. The underlying supply and demand issue which has defined the UK property investment market for many years remains unchanged and keeps the market buoyant. As always, buying in the right locations like those mentioned above is the paramount factor. Want to learn more about investing in UK buy to let property? Get in touch with our team today by clicking here.
Sanjit Dhanjal
29th June 2022

What effect, if any, will the war in Ukraine have on the UK property market?

The ongoing war in Ukraine is already having economic repercussions around the world, and it is likely that the full extent of these will only become apparent in the future. However, we can already see the consequences unfolding in some areas, including inflation and interest rates. This will inevitably affect the UK property market, and many people are beginning to ask what they can expect from property prices and rents in the future as they look for security and stability. Inflation and cost of living The most obvious and immediate impact of the Ukraine war is that several major European energy sources have been jeopardised. This has led to increased energy and fuel costs which are the basis of the rising cost of living. Growing costs in all areas are squeezing households more than ever before, and it has been predicted that the financial impact could become worse before it gets better. Indeed, inflation hit 6.2% in February 2022 – a 30-year high. Tom Bill, head of UK residential research at Knight Frank, said: “The most immediate impact is likely to be increased inflationary pressures at a time when the cost-of-living squeeze is pushing up fuel and grocery bills. “The financial pain that households are experiencing could get worse, increasing downwards pressure on house prices. While it is a mathematical inevitability that inflation will start to fall later this year, the risk that it will spike higher in the short-term has risen sharply.” But is this negative outlook borne out by the most recent house prices? Record house prices Against this backdrop, the latest reports from Rightmove show that the average house price in Britain has reached a record high of more than £354,000 as of March 2022. This follows a 1.7% rise in February and represents growth of 10.4% annually across the UK. When looking at individual regions, all apart from London saw average annual growth of at least 10%, reflective of the Capital’s overheated housing market and the number of people leaving for more affordable and popular destinations such as Commuter Belt towns like Hayes, and other big cities like Manchester and Birmingham. Likewise, a recent report from Halifax agrees with the above conclusions, stating that house prices are growing at their fastest rate since 2007 in defiance of the prevailing economic conditions. The bank has measured annual house price growth of 10.8%, an even higher rate than Rightmove recorded. What keeps demand so strong? So, we have what seems like a contradiction to consider: a cost of living crisis, made worse by the war in Ukraine, that means people have less money to spend than ever before, versus the reality of a housing market that continues to set new records. Russell Galley, Halifax’s managing director, said: “The war in Ukraine is a human tragedy but is also likely to have effects on confidence, trade and global supply chains.” He said soaring oil and gas prices were one immediate consequence, meaning that UK inflation would remain higher for longer, adding to the squeeze on already stretched household incomes. Meanwhile, further interest rate increases looked likely in the near term. That argument makes sense, and it is an understandable worry for investors looking at the present and future market. However, by returning to the latest data from Rightmove, we can identify the reason that house price growth has remained resistant to larger economic concerns – and could continue to do so in the future despite fears of a downturn or cooling of the market. The foundational fact of the UK property market which drives everything else is the gap between supply and demand. Until enough new homes are built each year to meet that demand, competition will continue to increase and that will naturally lead to house price growth. At present, the UK government estimates that the shortfall of new homes is approximately 100,000 each year. Rightmove data shows that the chance of finding a buyer for a property on the market within the first week is higher than it has ever been at this time of year and twice as likely compared with the same period in 2019. Tim Bannister, Rightmove’s director of property data, said: “Many of those who are selling in this record-breaking market obviously also face the prospect of buying again in the same market, and being in fierce competition against other buyers.” Add in the growing demand for larger and better located homes – such as properties in city centres or close to convenient transport links such as Crossrail – following the Covid-19 pandemic, and it seems unlikely that demand will slow anytime soon. The war in Ukraine is, without doubt, a disruptive global event, and investors should be aware of rising inflation and any interest rates increases that come with it as they have the potential to impact profitability. However, at this stage indications are that the UK property market is weathering the difficulties and has the potential to continue doing so. If you would like to learn more about the current state of the UK property market and find out about where the best places to invest in the UK are, get in touch with our team today by clicking here.
Sanjit Dhanjal
30th March 2022

Manchester and Birmingham growing strongly

The UK property market as a whole has resisted the economic turmoil of Covid-19 well, emerging strongly from the pandemic and continuing to grow. The latest index from the Office for National Statistics shows that the average UK house price grew by 9.6% over the course of 2021. Now, in the first quarter of 2022, we have seen reports from Rightmove, of the biggest monthly house price rises in 17 years, and a new average high of more than £345,000. However, the most important thing for investors is the future – so where are the best locations for investments which balance higher entry prices now with the potential for the most growth down the line? One of the best ways to predict the future prosperity of an investment location is to measure its rate of construction and development. This is a key market driver and an indicator that should be considered when looking at where to make your next investment. We have picked out two of the best places to invest in UK property here by looking at their construction activity in different sectors. Manchester Manchester is an interesting case for property investors because its success is known and understood, yet there is still plenty of room for growth and a huge amount of construction underway to deliver it. The Deloitte Manchester Crane Survey 2022 shows that the last five full years have seen almost 20,000 new residential units delivered to the Manchester market, of which just over 5,500 were completed in 2021. In addition, a further 10,700 units are in construction as of 2022, the majority of which are scheduled to finish in the next five years. This raises the question of whether the Manchester market is overcrowded, and therefore whether investors should be wary. The main consideration here is population growth – or to put it another way, will those additional 10,000+ units be enough to meet demand. By looking at future projections, we can say that the answer is likely to be no. Manchester City Council estimates that Manchester’s population will grow by a further 70,000 people by the end of the decade, and all of those will need homes. In particular, luxury city centre homes are already in high demand and short supply, making them a good market for long-term investment. Why are so many people moving to Manchester? The answer is the sheer number of high-quality jobs on offer combined with a first-class lifestyle. Returning to the Crane Survey shows the level of commercial building underway which is already translating into economic strength and employment opportunities. More than 1.3m sqft of commercial space is under construction in Manchester right now, with almost 750,000 sqft of that due to be delivered in 2022. Crucially, more than half of the commercial space under construction is already pre-let, and it is hard to think of better evidence for a vibrant, attractive city centre economy than that. More major schemes on the horizon will add to the total under construction in the future. These include Central Retail Park, Mayfield and more – significant regeneration schemes which are proving to be of interest to anchor tenants including the UK government, National Rail and several banks. Add in the 1m sqft of science, educational and research space completed over the course of 2021, including the world-class Manchester Engineering Campus, and we have the picture of prosperity in Manchester. A Deloitte spokesperson said: “Our latest results demonstrate that Manchester and Salford have been remarkably resilient during 2021 as the world entered its second year of the pandemic. Whilst there has certainly been some rebalancing of market activity over the last two years, overall construction levels are well above average for the city. “There are also plenty of new opportunities, with restrictions beginning to wane and a healthy pipeline of new developments fuelled by a continued appetite for inward investment in the city.” Want to invest in Manchester property? Learn more by clicking here. Birmingham Much like Manchester, Birmingham enjoys a strong reputation among property investors. The UK’s second city is a huge national success story, and 2022 could be its best year yet. Hosting the 2022 Commonwealth Games will allow Birmingham to shine, demonstrate to the world its progression over the past decade and showcase some of its best developments. The Deloitte Birmingham Crane Survey 2022 shows that the pace of development in the city has been relentless. The number of new residential schemes underway in Birmingham increased by 250% in the last year, with 14 new buildings breaking ground in that time. Deloitte’s data shows that 4,720 units are currently under construction in Birmingham. This is a volume of development that could set new records in the city. This leads to similar concerns as those mentioned above in Manchester – does this mean that the market is about to become saturated and, therefore, should investors stay away from Birmingham for now? By putting the numbers in context, we can see that investors should not be overly concerned with new record delivery statistics. Firstly, it should be noted that these unusually high future figures follow a year in 2021 where the volume of units delivered fell by 26% This was due to supply chain issues, restricted availability of materials and labour shortages that all contributed to delays and hit Birmingham construction especially hard. Secondly, much like Manchester, Birmingham’s population is growing at a rate that far outstrips the pace of construction scheduled for the future. The latest published figures from the Birmingham Demographic brief show that the city’s population is scheduled to reach more than 1.2m by 2038 – representing a growth of 7.8%. This is powered by a commercial sector which the Deloitte Crane Survey shows the pace of delivery almost quadrupled in the space of a year. Along with the aforementioned Commonwealth Games and Birmingham’s student population which grew by approximately 1,500 in the last year according to the Crane Survey, you have a recipe for future growth. A Deloitte spokesperson said: “This year’s Crane Survey shows that development in Birmingham city centre continues with major residential and office developments leading the way.” Want to invest in Birmingham property? Learn more by clicking here.
Sanjit Dhanjal
30th March 2022