At the start of the year, instead of the usual monthly update, we are publishing a forecast on the overall UK Buy To Let (BTL) market, for the year, based on advice from economist Chris Worthington.
As ever the buy to let market reflects the overall trends in the economy – and economic forecasts are of course tricky things to get involved with. Chris was reminded of a note to the Met Office written by Winston Churchill in the run up to D Day, saying that their weather reports were useless – but could they please keep sending them! That said, here are his thoughts on the buy to let market in 2017.
The current rate of inflation is 1.2% and the Bank of England is forecasting that inflation will rise to 2.8 % by mid 2018 as the impact of the weak pound lifts the cost of imports. This year growth in the economy will be weaker than in 2016, driven partly by a 1.5% fall in business investment and partly by a levelling out of the growth of the number of people in employment. Towards the end of last year average wage growth slowed to around 2% per annum and rising prices are starting to erode consumer purchasing power.
On interest rates, most commentators do not expect the Bank of England to increase the Bank Rate in 2017.
The growth in average house prices is expected to be moderate in 2017. Knight Frank forecasts an average 1% increase, with wide regional variations, while Nationwide predicts an average increase of 2%. However for buy to let investors, the forecast for rental growth is slightly more optimistic. Estate agents Savills forecasts an average growth in rents of 2.5% in 2017, with a steady increase in rents to 2021 totalling 19% for the five year period.
The forecast increase in rents will be good news for buy to let investors who have been hit by the increase in stamp duty and the changes in tax relief on mortgage interest and repairs and maintenance. It is hard to say if any new legislation affecting buy to let investors will come forward in 2017, but our view is that government will leave regulation of the buy to let market to the Bank of England criteria for buy to let mortgages. However we would not be surprised if the government introduced some form of incentive for the burgeoning ”build to rent” sector.
In the context of the anticipated slowdown in the UK economy and stagnant wage growth, buy to let landlords may be well advised to moderate any rent increases and as always if you have good tenants treat them well!
The next edition of our market overview, will look at Bristol trends, as usual.
Of course, we will all be discussing the prospects for the property market across the UK and in Bristol in 2017 at our next PIM – on 26 January 2017 at Holiday Inn, Bristol City Centre, 6-9 pm.
We hope you will join us then.
For more info and to reserve your place Click Below