A recent report has revealed that property in the UK is swinging more towards the rental market. As many commentators have mentioned, there has been a significant reduction in home ownership in the past number of years and many expect that this trend will continue.
The summer slowdown has seen properties with four bedrooms or more are struggling to sell, and as a result have remained on the market for an average of 74 days, according to data from RightMove.
Property analysts are speculating whether the property market will gain strength again during the Autumn and also get a clearer picture of the market and hopefully shake off that post-referendum hangover.
The Bank of England’s recent interest rate cut should give buyers some confidence with cheap-to-borrow money.
Although a lot of uncertainty still looms following June’s Brexit vote, the question remains:
Why is the UK is switching to a property rental market?
Firstly, this is linked to the surge of investors who were rushing to complete buy-to-let deals before stamp duty was hiked by 3% in April.
The demand for rented properties in the UK has increased by 10% due to Brexit uncertainties. Recently, the Royal Institution of Chartered Surveyors (RICs) reported the number of properties on the market was at a record low.
Another factor that should be taken into consideration is employment mobility. For example, if we look at millennials and their lifestyles, they are known for being constantly on the move, and renting a space is more practical to them than saving for a deposit.
In addition, they are very sociable. Figures from Statista highlight the importance of socialising to millennials. Their research shows that 51% stated that socialising was where their remaining disposable income was most likely to be spent. Therefore, the likes of build to rent properties are appealing as they provide communal areas for their residents, hoping that they will stay in their rented accommodation for some time. They are one demographic in particular that are currently reshaping the UK housing market.
From millennials, now turning our attention to investors. Long term investors are willing to pay just that little bit more compared with the likes of first time buyers who are looking at settling into their first home.
These are the type of investors who may have a number of buy to let properties in their portfolio and realise that as their financial liabilities reduce they will actually be able to increase rental income (providing they have done their homework properly and invested in areas that pay out suitable yields).
Whether the recent increase in buy to let related taxes, which were set by the former chancellor, will have an impact in the short to medium term still remains to be seen. If rental yields bring in enough money to cover all liabilities, and leave a wee bit extra in their bank accounts, the question is would BTL investors really pull out of this market?
If you are a BTL investor and HAVE done your homework, you’ll know that the north is the place to be. If you haven’t, we recommend Manchester. The Northern Powerhouse city has an average rental yield of 6.2%.
Investors can benefit from significant demand from the city famous for its two Premier League clubs and music scene, as well its big student population. Average property prices in Manchester stand at £135,000.
As we’ve previously mentioned, there are numerous factors as to why the UK property market trend has now switched from home ownership to rental.
The Brexit vote has caused some concern and confusion for now, and until the Brexit mist clears we will see fewer people committing to long-term property purchases. The likes of millennials are also changing the housing model and with lucrative investments across both sides of The Pennines, the rental market switch in the UK looks very buoyant indeed.