The Property Options Buy to Let Market Overview
Our regular Bristol and UK property reports are written by economist Chris Worthington, who is a regular speaker at our PIMs.
The latest edition of the UK House Price Index published by Zoopla, in association with property analyst company Hometrack, sets out the “complex array of factors” that are shaping the housing market.
- Progress on Covid – 19 vaccination will determine how quickly restrictions on movement and activity in the key sectors of the economy can be released.
- Higher unemployment will impact on market sentiment and levels of activity in the housing market.
- The trend towards working from home will continue together with the associated lifestyle changes – less commuting and demand for a home office and outside space.
The Office for Budget Responsibility (OBR) has warned that that the temporary boost from the stamp duty holiday that ends on March 31st will be reversed in 2021, with house prices dropping by more than 8% and not recovering until 2022.
The economic outlook is mostly negative for BTL investors and it might be expected that this would have a negative impact on the housing market. In reality the impact is more nuanced.
The Zoopla report found that:
- Demand for housing rebounded faster in 2020 compared with 2019 – but the flow of supply is slower.
- The strength of demand in 2020 took up a lot of supply – at the start of 2021 there were 7% fewer homes for sale than a year ago.
- The net result is an upward pressure on house prices. The UK average growth rate is currently 4.3% with the highest regional growth rates in Wales and North West England.
- At city level the highest growth rates were in Liverpool (6.3%), Manchester (6.0%) and Nottingham (5.8%).
At the present time the housing market is being supported by low interest rates, mortgage availability and the stamp duty holiday.
Looking to the future the impact of the end of the stamp duty holiday is uncertain and many people in the housing industry are calling for an extension due to the number of sales caught up the conveyancing process and a shortage of capacity to complete on sales within a reasonable time scale.
If the stamp duty holiday is extended, it could be included in the budget on 3rd March. Another possibility for the budget is a change in capital gains tax to bring the rates in line with income tax.
This is a time of great uncertainty for the UK economy. To clarify the implications for BTL investors it may help to consider the short, medium and long term trends.
In the short term much depends on the end of the stamp duty holiday and the possibility of it being extended
The medium term forecast for house prices is problematic and complex. The key question is for how long will house prices continue to defy the law of gravity in the midst of a severe economic downturn and an unprecedented economic context.
In the long term BTL investors should note that interest rates will continue to remain low for the foreseeable future. New investments and re-mortgaging existing properties can therefore be phased over time and form part of a long term strategy.
Our Next Property Meeting
We will all be discussing the latest position on the property market in Bristol and across the UK in the light of Covid-19 at our next PIM.
We’ll be arranging this when it is safe and practical to do so.
Meanwhile, stay safe.