November
PROPERTY MARKET UPDATE
30 NOVEMBER 2022
Rishi Sunak has put his best foot forward and his return to ‘Treasury orthodoxy,’ appears to be placating the markets. At the time of writing, UK interest rates are at 3% and predicted to peak at 4.25% in spring of 2023; significantly lower than the figures forecasted two months ago. In home lending, mortgage rates have responded to this stability with rates decreasing and in turn, the number of mortgage deals are beginning to steadily rise again. We are seeing a more typical return to business, and whilst it is possible we’ll witness price corrections in 2023 in parts of the UK, Savills and JLL, in their recently published five year forecasts, have both predicted UK wide house price growth from 2024 and in some key areas are still expecting growth over the next 12 months. Of course, the main news to buoy investors is that the rental market remains at ‘unprecedented levels’.
Key takeaways from House Price Growth Forecasts
“House price growth from 2024 onwards, with a more pronounced rebound in 2026,” say Savills. Price growth is expected in city centres where there is a concentration of richer buyers. Central London is showing the highest rate of growth with a 2.5% rise by Q4 2023 continuing to be driven by foreign investors making savvy currency plays; incredibly, the volume of sales of £5m+ homes in Central London is at its highest since records began in 2006.
Supply for new build properties is at all time lows with the shortage of new homes hitting 600,000 too few according to JLL, an increase of 100,000 from their previous calculation. This shortage will reach its apogee in the capital, where in London, only 32% of the supply needed will be delivered in the next five years. Thus, it’s easy to see why the capital appears to be bucking the national trend when it comes to growth figures; a 26% house price increase by Q4 2027, according to JLL – and a rise of 2.5% in 2023 alone. Savills’s forecast was more modest at 19.9%.
To take advantage of the London opportunity please have a look at RPA’s London options.
Don’t forget also that the slashes to Stamp Duty (the only remaining vestiges of Truss’s ill-fated ‘financial event’) remain in place; with Rightmove reporting that now one third of properties for sale on the portal are exempt from SDLT for first time buyers.
Where to buy outside of London?
According to leading UK estate agents, Birmingham and Manchester city centres lead the pack with 5-year growth figures of 19.2% and 19.3% respectively. They are also predicted to show price growth in 2023.
Elsewhere, new build eco homes also get a shout-out in the ‘what to buy’ annals; what with the new homes shortage and rising energy bills, energy efficient new builds are quite literally, hot property amongst investors.
Rents are remarkable
The rental market is remarkably busy with JLL reporting the demand for quality rental housing stock to be at unprecedented levels. In Q3 of this year there were -26% FEWER homes to rent and in London the figure was -30%. If you’ll excuse another property pun, demand is through the roof.
JLL summarised the scenario succinctly. “We expect that prospective buyers, as well as those who would under normal circumstances have transacted under Help to Buy, will remain in the rental market. This adds further fuel to an already constrained rental market and will, we expect, mean the supply demand imbalance and resulting rental growth will continue. Rental growth is expected to be particularly strong at the front end of the five-year period before falling back in line with historic norms of circa 2% - 3% as inflation is brought back under control.” People are and will continue to rent rather than attempt to get on the ladder.
Foxtons reported a 22% year-on-year surge in London rents with record numbers of new renters registering in Q3; 30 applicants for every property listed, a threefold increase on their usual figures. Meanwhile, new instructions from London landlords are down 18% in the first three quarters of 2022, compared with a year ago. Foxtons saying “the impact of the post-Covid return to the city has been acute.”
According to Savills, investors face a sweet spot, “particularly those with cash to hand or that have registered as limited companies” and who “will take advantage of price adjustments to secure stock with less competition from mortgaged owner occupiers.” Birmingham, Manchester and Central London, show strong gains in their respective rental markets- a whopping 6% increase in Central London and Manchester in 2023 alone and 5% for Birmingham.
Interestingly it’s not just mortgages driving demand for rental properties; the market is also absorbing the effect of hybrid working. The number of individuals renting properties has gone up, whilst the number of people renting with three or more people has declined. More and more working professionals are craving their own space; good news for landlords, especially when Andrew Wishart of Capital Economics reports that the average tenancy for individuals renting lasts four years.
RPA Group, through our partners at Brick Management, offer letting and management services for properties across the UK and if you would like to reach out to discuss this and their services let us know.
The RPA View
With the rental market booming and the currency weak, now still remains an excellent time to get into the market. The key, as ever, but perhaps even more so now is to identify the right location, the right property and ensure that what you are doing works for you. We specialise in a consultative approach that combined with our access to the market as a whole means that if buying property is something that you are keen to do then we are best placed to give you independent and impartial advice allowing you to make the best decision possible. If you would like to speak to us please click the button below and we would be delighted to expand further on what is happening in the market.
about the AUTHOR
RICHARD BRADSTOCK
Managing Director
RPA’s founder, Richard has worked in residential development investment for 20 years and oversees the general running of the business ensuring the RPA Group retains true to its founding principles. Over his career Richard has built an incredible network of international property investors and like-minded industry professionals. The RPA Group was born out of a duty of care to provide property investors with an industry-leading and integral service, one that connects investors with quality and desirable investment opportunities, whilst providing reliable and trustworthy market commentary and analysis alongside, enabling investors to make the best, most-educated decisions for them.