may PROPERTY MARKET UPDATE

02 June 2022

Welcome to our new monthly market report, an update on what’s happening in the UK housing market for UK property investors. If you’ve been following the news, you’ll know there is a lot to discuss in the UK market at the moment. As any seasoned property investor will say, out of uncertainty comes opportunity. RPA is here to help our clients navigate the prevailing market conditions and make the right investment for them, for right now, there are opportunities aplenty for UK landlords.  

The big squeeze on supply

We started 2022 in the grip of the Omicron variant which slowed the progress of new homes deliveries across the UK creating shortages in labour and building materials. The war in Ukraine further disrupted supply chains sending build costs soaring and developers were faced with delayed completions from the headaches in sourcing necessary materials at a competitive price. It is, therefore, unsurprising that UK housing delivery levels have declined for the last three consecutive quarters (Savills) and the number of consented development sites across the UK has fallen by a quarter since 2019.  

Clearly, the effect will be a profound squeeze on the housing supply. Nationally a third of local authorities are failing delivery targets, particularly in the southeast, parts of the southwest and around Manchester, leading to availability concerns. But a knock-on effect of the lack of housing stock is a projected continued rise in UK house prices. 

 Continued short-term house price growth likely  

A rise in the Bank of England base rate and record inflation of 9% - unmatched by income growth - will obviously affect UK property buyers’ attitude to borrowing. Mortgages will be more expensive. That said, market commentators still expect house prices to increase because of the hangover of lack of stock; the number of houses on the UK market is still 44% below the pre-pandemic level, with demand no less. The effect of this? A return to renting.

A return to renting

The increased cost of borrowing and the lack of available new build properties will lead many potential buyers to turn to renting instead; good news for UK landlords. The rental market will be further driven by the end of the government Help To Buy loans which accounted for 22% of all new homes purchased between 2019-2022. Property investors are getting in on the act with UK Finance reporting data from February that buy-to-let loans were 37% above the pre-pandemic average. Nationally, rents have risen 11% - that’s double-digit growth! - in the year to March 2022 and we have already reported how London is bouncing back. Check out the report here!