Here is Property Options’ update on the UK Buy To Let (BTL) market – with an overview for 2018.
This update is by economist Chris Worthington, who is one of our regular PIM speakers.
Housing Supply
The government targets are to raise housing supply to one million new homes by 2020 and to build 300,000 homes per year by the mid 2020’s.
The measures announced in the last budget will help to boost the housing supply, but the targets will only achieved through sustained year on year public sector funding, combined with robust policies to support new housing development, local regeneration schemes and improvements in planning.
Conversions of office space to residential use created approximately 18,000 new homes in 2016 – 2017 and a report from the Federation of Master Builders found that a substantial number of new homes could be created from spaces above shops.
The report recommends that local authority planning policies should make reference to building homes above shops and that incentives should be available.
A report published by the Home Builders Federation found that 20% of workers on house building sites are not British born. It recommends that the industry will need continued access to skilled workers from the European Union after Brexit.
House Prices
For 2018 the Halifax forecasts an average increase in house prices of 0 – 3%, Nationwide forecasts an average increase of 1%.
The Royal Institute of Chartered Surveyors (RICS) forecast is that the average house prices in the UK will be flat in 2018 with moderate increases in some of the regions, but with possibility that prices will edge lower in London and the South East.
The longer term forecasts of growth in house prices from two of the major estate agents are more optimistic. Savills forecasts a growth of 14.2 % from 2018 – 2022. The forecast from JLL is an increase of 12.6 % over the same five year period.
Rents
A recent report from JLL forecasts an average increase in rents of 2% per annum in 2018 and 2019 with a slightly higher increase of 2.5% per annum from 2020 to 2022.
The forecast from Knight Frank is 2.5% per annum from 2018 – 2020 and 3% per annum from 2021 – 2022, a cumulative increase of 14%.
The forecast from Savills is a cumulative increase of 15.5%
Interest Rates and Mortgages
At the start of November the Bank of England raised interest rates from a record low of 0.25% to 0.5%. Most commentators think that this is likely to be the first of a number of rises over the next five years with forecasts indicating that it could reach 2.25% by 2022.
Further pressure on mortgage interest rates is likely as the Bank Rate is gradually increased in the next year or two.
As the BTL mortgage market tightens through the increase in interest rates and the affordability criteria imposed on lenders by Prudential Regulation Authority, BTL investors may increasingly need to go to specialist lenders, including peer to peer lending companies.
Find Out More
We will all be discussing the latest position on the property market, both in Bristol and across the UK, at our next PIM on Thursday 25 January 2018 at Future Inn, Bristol City Centre, 6-9 pm.
We hope you will join us then.
For more info and to reserve your place Click Below
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