UK House Prices

A new survey by Zoopla released on the 30th of May 2022 suggest the average property prices have hit £250,200 for the first time, but a potential slow down in appreciation is on the way following the bank of England’s decision to increase the base rate to 1% announced earlier this month, as the UK grapples with high inflation and a steady increase in borrowing costs, the housing market has retained a surprising amount of momentum.

Despite this, interest rates still remain well below historical level’s so investors planning to take out a mortgage are advised to act swiftly to secure the opportunity of low borrowing rates for their buy to let investments.

Double Digit House price growth -but market set to slow.

Annual House price up 11,2% in May compared to 12 months ago.

House price Indices

The following organizations have produced house price indices in May (Percentages refer to year on year growth)

Halifax                 +11.0% (down from +11.0% in March)
Nationwide          +12.1% (down from +14.3%)
ONS                    +9.8% (March; down from +11.6%)
Rightmove           +10.2% (up from +9.9%)
Zoopla                 +8.3% (March; up from +8.1% in February)

The first to publish were Nationwide and Zoopla. Nationwide’s house price index shows a monthly, seasonally adjusted change of +0.3 and an annual gain of +12.1%. This is a slightly slower rate of growth than last month but it’s important to remember that 2021 was also a period of strong gains and so these 12-month comparisons are made against a rising baseline.

Rental Data and Forecasts

The most recent UK rental market analysis was from Zoopla, which reports annual rental growth of +11.0% UK-wide, with even higher local returns in London (+15.7%), Northern Ireland (+14.0%), Wales (+11.05) and the North West (+10.9%). Top-performing cities include Manchester (+14.3%), Belfast (+13.7%), Birmingham and Nottingham (both +13.0%).

As we indicated last month, most sources appear to believe that average rents will continue to rise throughout 2022. Overall, Zoopla expects the annual rate to fall back to around +4.5% by the end of the year, with slightly lower returns (+3.5%) in London. It notes: “We expect rents to continue to rise this year, but at a more modest pace… in line with independent forecasts for earnings growth for 2022.”

Ban on Ground rents – Future homebuyers to be freed from expensive ground rents bills from 30 June!

The government has announced recently that future homebuyers of leasehold properties will no longer have to pay ground rent which will be banned from 30th of June under the Leasehold Reform Act. This is great news for investors of leasehold properties as it will reduce prospective property bills in just over two months, when the governments ban on charging ground rents on new leases in England and Wales comes into force.

The return of the Student Market

One of the reasons that Zoopla cited for the apparent return of tenants to big cities and their outlying commuter districts was the receding threat of the Covid pandemic. As risks diminish, more people are returning to the cities for work, for the lifestyle and, of course, to study. Over the last two years, universities have encouraged less on-campus study and, as a result, there was a pronounced lull in demand for student accommodation. Now, however, in the run-up to the new academic year, Zoopla is seeing a surge in demand for student accommodation in particular the North and East Midlands. The same trend was picked up in a mid-May report by UCAS, which quoted an impressive +14% upturn in university applications for the 2022-23 academic year.

Investors can enjoy healthy yields of 7%+ for example in our latest completed Student Property opportunity Silk Mill Suites based in Lancaster, where prices start from £87,800 for a fully furnished Studio apartment.

Buy to Let Property Focus

We continue to a great demand in interest for properties in Media City, where we now have a limited number of apartments available in Michigan Towers Phase 1. Prices start from as little as £180,000 and include a free furniture package and early investor discount, but hurry as prices are due to increase by 5% end of June and availability is now limited.

Preston is also a buzz with regeneration in the city centre, with steady sales at The Exchange in Preston where prices start from £140,000, construction is progressing rapidly and on target for completion for Q1 2023.

We have also been seeing a growing appetite for lower cost freehold houses, HMOS and Serviced Accommodation in coastal towns such as Blackpool, where you can pick up a bargain with Fabrik Invest with 2 and 3 bedroom houses in this popular coastal town starting from as little £85,000 and rental yields between 7%-10% per annum.

New launch coming soon! Sheffield is our latest buy to let hotspot and we are excited to let you know we have have secured an off market deal on 31 exclusive apartments in a completed Riverside development near the City Centre coming to the market within the next few days. The apartments allow for long term tenancy as well as short term lets as serviced accommodation with yields of between 6%-10%, so keep an eye out for the information via email as we expect these will sell very fast !

Summary

May has seen a growing emphasis across the media on cost-of-living pressures and their likely effect on the property market. A reduction in real incomes coupled with political tensions, restrictions on international trade and the risks of higher mortgage costs are all likely to act as a brake on rapid growth in the months ahead. However, the market fundamentals remain very strong and savings in the bank are currently being eroded due to inflation, stock markets are very volatile as is cryptocurrency.

Demand for hard assets such as property will continue to exceed supply by a considerable margin, both with respect to potential buyers and potential tenants. Consequently, most sources are predicting steady but more modest growth in the coming months.

Popular university towns and cities might therefore be particularly sound choices for new investment acquisitions, as might attractive coastal cities and resorts. For those prioritizing rental gains, commuter belt London communities and the Northwest cities such as Liverpool, Manchester and Sheffield are looking very attractive.

Source: fabrik property group