This update is by economist Chris Worthington, who is a regular speaker at our PIMs, including last month.
Last month I was pleased to be one of the speakers at the monthly PIM (Property Investment Meeting) organised by Property Options. The title of the presentation was “Buy To Let in 2108. There was a good audience at the Future Inn and some challenging questions tested my knowledge of the market. Here is a summary of the presentation.
The Policy Context
A white paper entitled “Fixing Our Broken Housing Market” was published in February 2017 and the budget in November allocated new funding to investment in housing. The overall policy aim was to improve the supply of housing in the private and public sectors.
The only measures that will impact directly on the Buy To Let (BTL) market were the strengthening of the regulations for rented property.
In September 2017 the tightening of the underwriting criteria for BTL mortgages came into effect and in November 2017 the Bank of England raised the base rate to 0.5%
The Economic Context
The average wage increase in 2017 was only 2.3% and the rate of consumer price inflation was 3.1%.
Real wages are therefore falling, thereby reducing the affordability of rents for many tenants.
The Bristol economy continues to go from strength to strength with high wages in key sectors such as IT, aerospace, financial services and the creative industries
In 2017 average house prices in the UK increased by around 4.5%.
House prices in the major cities increased by 6.3% ,apart from London where house prices increased by only 2.7%.
House prices increased in Bristol by 6.1%.
The forecast average increase in house prices in 2018 is less than 1%. The forecast average annual increase from 2019 – 2022 is around 2.7%.
Rents and Rental Yields
The average rent increase in 2017 in the UK was 0.5% compared to 1.2% in 2016.
The forecast average annual rent increase from 2018 – 2022 is around 2.5%.
The areas with highest rental yields are almost all in the North of England and Scotland.
The average annual rental yield in Bristol is 3 – 4%.
New Housing Developments in Bristol
Extensive new housing developments on the waterfront, in the city centre and other areas of the Bristol will provide new opportunities for BTL investors.
Summary : Buy To Let in Bristol in 2018
- Bristol’s strong economy will ensure that BTL investment in the city will continue to achieve annual rates of return that are higher than the UK average.
- The increase in house prices and rents will be moderate in 2018.
- There will be stronger growth in annual house prices and rents from 2019 – 2022.
- Interest rates on BTL mortgages will gradually rise in line the increase in the bank rate.
- New housing developments in Bristol will provide opportunities for BTL investors.
- Compliance with new regulations will increase costs for BTL investors.
Our Next Property Meeting
We will all be discussing the latest position on the property market in Bristol and across the UK at our next PIM on Thursday 29 March 2018 at Future Inn, Bristol, BS1 3EN.
We hope you will join us then.
For more info and to reserve your place Click Below