Continued Increase in UK Property Demand Great News for Investors

Continued Increase in UK Property Demand Great News for Investors

In unsurprising news, RICS has announced that UK housing demand continues to increase. November’s figures show an increase in buyer enquiries by 3% over the previous month (up to 13% in November from 10% in October).

This demonstrates a third consecutive month of increases in the number of prospective buyers on the UK housing market.

“Although there are some signs that the numbers may begin to edge upwards in the new year,” says RICS Chief Economist, Simon Robinsohn. “The combination of macro uncertainty, the on-going supply shortfall, with stock levels around historic lows, and the myriad of tax changes impacting on buyers suggest that any pick-up in activity will be relatively modest. This is significant not just for the housing market itself but also for the wider economy given how much of consumer spending is tied in with home purchases.”

There are no signs that the current UK housing shortage is likely to ease off any time soon. New sales instructions rose from minus 3% to zero in the same period. Seller numbers, therefore, are slightly higher, but not enough to meet the continually strong demand.

Where there is a discrepancy between the sales market and buyer market like this, it implies that more people are either moving direct from rental accommodation, or are first time buyers. The buy-to-let market, however, is still strong, despite stamp duty hikes and tax changes implemented at the start of the 2016-17 tax year.

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UK Property Demand Rises Pleases Investors

All of this, of course, is great news for property investors. With such high demand for housing, and the value of properties still on the rise (albeit less so than in earlier months of the year), the chances of significant gains, in buy-to-let, new development or ‘flips’, are looking good.

Most of the UK is continuing to see an increase in prices, particularly in the North West, where the market is booming. Week after week, we are seeing fresh reports of the continuing rise in popularity of properties in the Manchester area.

This is, in part, due to heavy investment in development of the city’s infrastructure, and an influx of businesses relocating to the area.  These new businesses, bringing fresh jobs to the North West, are further increasing demand, particularly in the rental sector, as young professionals continue to find promising careers in the region.

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Property Investment Predictions For 2013

The Royal Institute Of Chartered Surveyors (RICS) have made positive property investment predictions,  forecasting that UK house prices will rise 2% during 2013 and rents will increase by 4% on average.

It also forecasts a rise in the number of property sales. It estimates that there will have been 930,000 property transactions in 2012, and this will increase to 960,000 in 2013.

RICS is also predicting that the number of repossessions should fall to under 35,000 – the lowest figure in 6 years. Simon Rubinsohn, RICS’s chief economist, said: “The average house price in the UK looks set to rise by a further 2% next year, despite the uncertain outlook for the economy.

“More positively, the amount of property sales going through should also see an increase across the country, climbing to its best level since 2007, as the Funding for Lending scheme helps boost the availability of mortgage finance.

“But these tentative signs of recovery in the sales market should not blind us to the very real problems that still exist. Even with the Funding for Lending scheme and some other government policies beginning to be felt in the mortgage market, many first-time buyers will continue to find it difficult to secure a sufficiently large loan to take an initial step on to the housing market.

“Meanwhile, the alternative of renting is becoming more and more costly, with a further increase in rents likely in 2013. Critically, the Government needs to ensure that the conditions are in place that will enable the stock of new housing, whether for purchase or rent, to rise more rapidly.”

The House Crowd view: if these property investment predictions are correct, it should make it easier to sell our refurb/sell projects, though we still believe it will be fairly tough for first time buyers to get a mortgage and it will continue to take a while to find buyers.

It bodes well for our long term buy and hold strategy that the shortage in housing will continue, pushing up rental demand and to some extent rents.

Although we recognise there are limits to what people can afford to pay and we know from the Council Landlord Forums we attend, that LHA rates in Salford /Manchester will only rise by about 1% next year, but as you know we typically achieve 11% yields and have plenty of margin to pay the 6% guaranteed yield.

There is now such stiff competition in the market for investment properties in the £45-£55k price bracket, that we operate in, that we cannot see how prices could fall further. If anything they will probably rise slightly in 2013.