This update is by economist Chris Worthington, who is a regular PIM speaker – and will be speaking at this month’s PIM.
House Price Forecasts
New figures have been published in the last month by a wide range of organisations including major estate agents, economic consultancies, the National Institute of Economic and social Research (NIECR) and the Royal Institution of Chartered Surveyors (RICS).
The forecasts of house price growth in 2020 from a total of 15 organisations range from 4.5% to 1% .
How to account for such a wide variation? The answer is different data sets and different financial models – but who is right? It’s hard to say but half of the forecasts are in the range of 2 – 3 %, making that a reasonable working assumption for buy to let (BTL) investors.
The latest Quarterly Rental Market Report published by Zoopla reported the following findings on rents in the UK:
- The annual rate of UK rental growth is 2.6% up from 1.4% a year ago. This has been driven by a contraction in the number of homes to rent while demand for rented homes increased by 8% during 2019.
- The highest levels of growth in rents at around 5% has been in Nottingham, Bristol and York.
Rental growth in London is at a four year high at 2.8%.
Rents fell around 1% in Coventry and Middlesbrough and by 3% in Aberdeen.
- Average earnings have outpaced rental growth for the last three years so the increase in rents is not impacting on affordability.
A single average earner is spending around 32% of earnings on rent.
Buy to let investment continues to support a flexible and dynamic part of the housing market, generating good returns for investors in terms of both capital growth and year on year rental growth.
There is increasing evidence that investors are seeking out locations where the rate of return is higher than the average, providing accommodation in areas where there is a high demand.
This is not necessarily the case across the whole housing market, in particular there are a large number of empty homes in many parts of the UK.
A report from the estate agent comparison company GetAgent.co.uk found that there are over 300,000 empty homes in the UK that have been empty for more than six months.
Bringing about 40% of these homes back into use would provide enough homes for all of the people who are currently homeless.
Local authorities have a range of powers and incentives at their disposal to bring empty homes back into use.
These include, but are not limited to, empty dwelling management orders, council tax exemptions and premiums, enforced sales, compulsory purchase and the sale of properties owned by the government.
BTL investors might consider contacting their local authority to find out if there is any potential for investment in empty properties to bring them back into use.
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 27 February 2020 at Future Inn, Bristol, BS1 3EN, when Chris Worthington will be one of our speakers.
We hope you will join us then.
For more info and to reserve your place Click Below