Here is the latest edition of the Property Options’ monthly update on the UK Buy To Let (BTL) market
Since the Brexit vote there has been lot of speculation about the impact on house prices.
The latest statistics from Halifax and Nationwide indicate that year on year average house prices have increased by 8.4% and 5.1% respectively.
However these are annual figures and in recent months the trend is towards a deceleration in house price growth. The House Price Index published by LSL Property Services confirms this trend.
Between April and May there was month on month decline in house prices in the UK averaging 0.9% with a steeper decline in London of 1.4%. The figures quoted are from the month before the referendum, so what are the possible explanations?
Mortgage rates remain exceptionally low and the supply of housing on the market has not improved so both of those factors can be discounted. The month on month fall in house prices is consistent across the UK so an overshoot in house prices in more expensive areas such as central London can also be discounted.
A possible explanation is overall fall in consumer confidence arising from wage stagnation and a prevailing uncertainty about future house prices. The YouGov/Cebr Consumer Confidence Index, which measures people’s economic sentiment on a daily basis, has collapsed since the vote to leave the EU. In the first three weeks of June it stood at 111.9 but in the days since the vote it slumped to 104.3.
It is expected it will decline further as the consequences of Brexit kick in. The biggest causes for this were homeowners’ concerns about property prices over the next 12 months and the levels of business activity at peoples’ workplaces over the coming year.
This situation is likely continue as the uncertainty arising from Brexit has a negative impact on investment decisions by consumers and companies. For the time being “wait and see” appears to be prevailing sentiment. However in the long run there are grounds for optimism.
The Royal Institute of Chartered Surveyors (RICS) has recently reported that confidence remains more resilient that might have been anticipated with a forecast of average price growth of 4% per annum over the next five years in London and 3% elsewhere in the UK. As ever buy to let investors should plan for the long term!
The trend in rents is more positive. The latest Rental Trends Tracker published by Rightmove recorded an annual increase in rents in the regions of the UK by up to 5%. This will compensate for the slow down in house prices. The latest Buy To let Index published by LSL Property Services estimated that the average landlord in England and Wales acheived a total return on investment of 10% in the past year.
Looking at the economy overall a Reuters poll of economists revealed that growth in the UK will contract by 0.1% in both the third and fourth quarters of this year but will to return to modest growth next year. If so consumer confidence and house prices will start to recover in 2017.
Our next update will focus on the buy to let market in Bristol and it will be interesting to see how well Bristol’s prosperity is taking forward the buy to let market, as Brexit impacts on the wider economy.
We will all be discussing the latest position on the property market at our next PIM on 29 September 2016 at Holiday Inn, Bristol City Centre, 6-9 p.
We hope you will join us in September.
For more info and to reserve your place Click Below