At Your Move, we know you can’t make the best decisions about what to do with your investment properties unless you know what’s really happening in the property market.
That’s why we invest in excess of £100,000 every year in working with a leading UK housing market research consultancy, Acadata. The company is headed by Dr Stephen Satchell, Economics Fellow from Trinity College, Cambridge and Peter Williams, Director of the Cambridge Centre for Housing and Planning Research. Their research helps us support our landlords with the monthly reports we produce:
We also provide a specific index’s for Scotland, find out more on the Your Move blog.
So, wherever you are in the UK, we’ve got all the information you need to know about your local market. And whatever you’re looking to do in terms of property investment, we can give you accurate, up-to-date analysis to help you make the right choices.
What the latest data shows about property prices
There are four main trends that are worth keeping an eye on:
1. Property market performance – is it strong, weak or static?
2. Rental returns – are they rising, falling or static?
3. Regional variations – what’s happening in your specific area.
4. Tenant arrears – is the number of rents not being paid going up or down?
And of course, no current property market round-up would be complete without mentioning the effect of the #Brexit vote! If you missed last month’s landlord newsletter, you can catch up on the article here.
Property market performance in England and Wales
At the end of 2015, prices were averaging £290,642 and had increased by around £16,000 over the year. That’s a rise of 3.8%, excluding London and the South East, while London experienced an 11% boost. Sales were also up by 7.1% across England and Wales.
Six months on, average property prices are now at £293,318, up £2,676 over the period. And although there was a spike in price inflation in February (8.9%), that’s now dropped back to 4.8% - still higher than what it was at the end of last year (3.8%). So, overall, a healthy performance.
As a Buy to Let investor, this is great news because you’re always aiming for the value of your property to go up by more than inflation. When your returns increase by more than the cost of living, that means you’re making more money. With house prices growing at an average of 4.8% a year and inflation currently running at 0.5% (link: https://www.ons.gov.uk/economy/inflationandpriceindices),the real value of your Buy to Let investment definitely improved - as long as it’s performed at least at the national average.
Property market performance in Scotland
Average prices in Scotland for May were £172,119. That’s actually a fall in prices of 4.6% compared to a year ago, but the latest monthly change was a rise of 0.9%, so falls may be on the turn. Christine Campbell, Your Move managing director in Scotland, says: “Next month the spike in prices from the 2015 LBTT change will fall out of annual figures. The Scottish market is starting to get back to some sense of normality, yet with Brexit, there could be some changes ahead. The next few months are going to be interesting, but thus far the sentiment is very much business as usual, with the market remaining buoyant.”
Rental returns in England and Wales
Regardless of your main reason for investing - capital growth or income – you’ve got to keep track of rental income averages. They’ll indicate whether you can increase rents on an ongoing basis, or whether you need to hold back and try to reduce costs where possible to maintain your level of income.
By the end of 2015, average rents stood at £794 per month, up 3.4% over the year, which was the fastest growth rate since 2011. Rental yields (rental income / property prices) were 4.9%.
Our latest Buy to Let data suggests rents are currently averaging £792 per month, just a few pounds down since the end of last year, although yields have held steady at 4.9%.
Successful property investors know it’s what’s happening in their local market that has the biggest impact on their returns.
Property price-wise perspective, at the end of 2015 the best performing areas in London were Haringey, up by 22.2% year on year, closely followed by Southwark, up 17.4%. The worst performers were Hammersmith, down 4.9%, and Kensington and Chelsea, down by 3%.
Regionally, some of the best performers were Luton in the Home Counties and beyond, (+17.5%), Swindon (+14.6%) and Reading (+14.2%), while areas that saw falls included North East Lincolnshire (-3.6%) and York (-1.6%), with Redcar, Cleveland and Hartlepool all down by 1.5%.
Homeowners usually see big price rises as good news, for obvious reasons. But for investors who want to buy more properties and expand their portfolio, a quieter market can be much better. That’s when it’s much easier to pick up a bargain, helping you make money at the start of your purchase as well as in the longer term when prices do rise.
In the lettings market, rents and yields overall are currently pretty much the same as they were at the end of 2015, although some areas have seen changes. In the West Midlands, yields have risen from 5.6% to 5.8%, in Yorkshire and Humber they’re up from 6.4% to 6.6% and North East yields have risen from 5% to 5.2%. London’s the only place where yields have fallen, from 4.1% to 3.9%, which is down to the big price rises in the capital over the last few years.
Of course, all these figures are looking at it as if you were buying in today’s market. If you’ve been a landlord for a while, your rental yields have probably been pretty static over the last six months. Some people will have had an increase of a few pounds, others will be a few pounds down, but no real significant changes.
The good news is that the number of tenants in arrears seems to be heading downwards, with 3,100 fewer households in serious rent arrears in Q1 2016 compared to Q4 2015 - a 4% fall. Evictions were also down slightly, with 26,230 court orders for eviction made in Q1 2016, down from 26,964 in Q4 2015.
As Adrian Gill, director of Your Move, says and the chart below shows, “The affordability of renting and the number of tenants falling behind on rent also needs to be seen within the context of the rapid expansion of the private rented sector and the addition of millions of extra houses and flats to rent.”
(See the full article here)
So despite the numbers renting almost doubling, there hasn’t been a corresponding increase in tenants in arrears.
Don’t forget, if you’re worried about tenant arrears and how you’d be able to pay the mortgage if you didn’t have any rent coming in, take a look at our Rent Protection and Legal Cost Insurance Scheme. It insures you against loss of rental income for up to 6 months and pays the rent to you right away, so there’s no waiting and worrying. It also covers you for legal costs of up to £15,000 if you need to evict your tenant**.
See our website for more information and get in touch if you’d like to talk about the benefits of taking out cover. #LandlordInsurance
** Terms and conditions apply. This information is a summary only. You will receive a full policy document upon application. This policy will set out the terms, conditions and limitations of this product.
Lots of people are trying to work out what’s going to happen in the property market following the #Brexit vote but we think it’s just too early to tell what it’ll mean, long term.
What we do know is that the vote to leave has resulted in uncertainty and usually, when people feel that way, either price growth slows or prices fall. But at the moment we’re getting mixed signals.
It’s particularly difficult to tell what’s going on with the market because of the 3% increase in stamp duty that kicked in at the end of March. Property price and transaction figures have already been skewed with price inflation and transactions up dramatically earlier in the year, when everyone was rushing to beat the deadline.
All that being said, you can see that we track the market in great detail, so as soon as we know what’s happening and see any changes in trends, we’ll let you know. Meanwhile, if you’re thinking about expanding your portfolio or wonder whether you might be able to increase your rents, speak to our Buy to Let experts at your local Your Move branch.
Further information about Brexit: what does it mean for landlords can be found in last month’s newsletter here >
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