The Bank of England once again raised the base rate in February, provoking panic prior to the release of resulting mortgage rates. With a UK recession predicted this year, eyes are on the housing market to see how it will react. This week’s blog will demonstrate the rhetoric about the UK property market plummeting which plagued the close of 2022, but in contrast provide examples that 2023 is already demonstrating the property market’s buoyancy and ability to dodge economic icebergs.
As we progress into the new year, newspapers continue to share sensationalist headlines about property “slumps” and “crashes”, whilst also sharing contradictory information.
Take this example from The Telegraph:
How can the property market be simultaneously ‘imploding’ and having ‘the biggest “New Year bounce” since 2016’? The answer is simple – it can’t. Scaremongering simply sells more newspapers. In fact, the future is looking sunnier than initially anticipated for property investors. January 2023 opened with a surprise increase in house prices of £3300 on average.
Additionally, property giant Rightmove is describing January 2023 as the ‘biggest New Year bounce in three years’ and has seen a 55% increase in enquiries over this period. They also shared that ‘there are several signs of positivity’ heading into 2023 and that they are starting to see ‘familiar trends and a calmer, more measured market after the rapidly changing economic climate of the final few months of last year’. Zoopla data also shows that current buyer interest is in line with the pre-pandemic years and 10% ahead of 2019. Not only that, prices are still up year on year.
Despite demand being high, Zoopla data shows 8% smaller stock of new homes for sale and the flow of new supply lessened by 4% compared to 2019. Population growth of nearly 10,000,000 since the year 2000 and failure to meet government new build targets by huge amounts every year for over a decade has left the UK critically short of housing stock. According to the National House Building Federation, 340,000 new homes are needed every year to keep up with demand. Despite this, FTSE 100 developers Taylor Wimpey, Persimmon and Barratt Developments have all said that they will ease up on buying land for new home building out of concern for the property market. This intervention is likely to shield the UK property market and provide a buffer for house prices by keeping supply down.
On 2nd February 2023, the Bank Of England raised the base rate to a 14-year high, which now stands at 4%. However, contrary to popular belief that mortgage rates would follow suit, mortgage rates have actually gone down. It stands to reason that increased mortgage affordability will increase the number of people buying property, therefore strengthening the UK property market.
The number of homes available for rent right now is less than half normal levels according to Zoopla, who also reported high rent increases during 2022:
Alternative data demonstrated even higher rent hikes in key cities, such as Manchester.
In some areas, estate agents have waiting lists of hundreds of people and prospective tenants offering to pay rent in advance and offering gifts to seal the deal. The current cost of living crisis is also restricting home purchasing, with data from Aviva showing that more than a million Brits under 45 could rule themselves out of the first-time buyer market. As costs rise but wages inflation is yet to catch up, mortgages are accounting for a much larger percentage of people’s earnings:
This means increased demand for good quality rental accommodation and a further increase in prices that is not set to slow any time soon. Now is a fantastic time for those that have the available funds to invest in property and benefit from the rental market.
Lloyd’s bank is pressing ahead with purchasing properties in their plan to be the UK’s largest private landlord by 2025. If a financial institution as large as this one is putting large amounts of property into property to ‘increase revenue’ with all of the financial due diligence and profit projections that will have taken, you can be confident that property is a secure investment.
The short answer is yes.
The UK’s longest-running monthly house price index from Halifax showed that house prices remained largely unchanged in January – far from the imminent crash that was rumoured. At the same time, other major house price indexes are showing that UK property prices rose in January 2023. If you are looking for your next passive income boosting investment opportunity, the highly knowledgeable team at Redmayne Smith are here to help. Providing a full-service property investment experience, our Investment Consultants ascertain your goals and budget to recommend the best off-plan or new build property for you.
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