Breaking Property News – 14/06/2023
Daily bite-sized proptech and property news in partnership with Proptech-X.
Nicky Stevenson MD of Fine & Country feels optimistic about housing market
Despite a drop in the number of sales and a recorded softening of house price growth, headwinds to the market look set to improve in the near term. This is according to Nicky Stevenson, MD of premium estate agency Fine & Country, who add that the predicted soft landing will be the most likely outcome, supported by a strong labour market, growing consumer confidence and an increasing acceptance of a higher mortgage rate environment.
Stevenson notes that the UK HPI indicates a modest start to the year, showing a property market still iced over by the mini-budget fallout. “A gentle slowdown of 1.2% was recorded between February and March, but up 4.1% year-on-year. Nationwide has recorded house price growth softening, with a 0.1% month-on-month fall in May, following a 0.4% rise in April.
Rightmove however, paints a much more positive picture, with a monthly increase of 1.8% in May on the average price of a property coming to market, the biggest jump of the year so far,” she says. “Despite tougher market conditions, the market is showing stable resilience.
Homes are selling, although at a slightly lower rate and many at a lower price than seen over previous months. Flatlining prices are luring a steady stream of buyers, with agreed sales over the past four weeks having reached their highest point so far this year, up 11% on the five-year average on the same period.”
Stevenson says that confidence in the market is showing shows of growth. “CPI inflation is finally falling, decreasing to 8.7% in April, which may help reassure prospective buyers that they will be able to afford their mortgage repayments. Despite mortgage rates being likely to creep up in the coming weeks, the increase in competitive mortgage products will help put more people on the property ladder.
Confidence is growing, with OnTheMarket reporting that 70% of buyers canvassed in April stated they were confident they would purchase a property within the next three months, and just 7% stating they were concerned about securing a mortgage to fund the purchase,” she comments.
“HMRC report 82,120 sales took place in April 2023, a fall of 7.9% on March and 25% on the same time last year. Despite this, the sunny weather and triad of May Bank Holidays have given buyers the opportunity to rekindle their property search, which may start to be reflected in the data from next month.
Buyers are benefiting from a market with more breathing room compared to a year ago, with time to consider their options carefully. According to Zoopla, there has been a jump in the number of buy-to-let landlords selling up, currently accounting for 11% of properties for sale, as property investors are confronted with higher mortgage rates, energy bills and increasing legislation.
Sellers should be cautious of recent positive data on the housing market and price their homes realistically. Indeed, almost four-fifths of offers are currently being accepted below initial asking price,” says Stevenson.
Looking at the prime market, Stevenson says it continues to show resilience, with the average price of a property in the prime market at £1,301,093, down 0.1% on last month but up 7.9% year-on-year. “Over 31,000 sales priced £1 million or above took place across England and Wales in the year to March 2023, up almost one third on pre-pandemic levels.
With temperatures finally heating up, gardens remain popular. According to ONS, 88% of homes in the UK have access to a garden or outside space. A well-maintained garden can add a premium of between 5% and 20% to a home, with a south-facing garden adding 7%,” she concludes.
Challenging economic times are making landlords think creatively
Press Release – Property investors look to pay down debt as interest rates rise
Large portfolio professional landlords[1] are looking to pay down debt as they focus on optimising their portfolios in the face of challenging economic conditions, new independent research* conducted on behalf of property business expert Handelsbanken shows.
This year’s Handelsbanken Professional Landlords Survey – based on nationwide research among large UK investors with an average of 29 properties worth c £14 million each – shows professional property investors are acutely aware of the risks and challenges facing the sector.
It found 91% are looking to pay down the debt on their portfolios in response to rising interest rates with a focus on ensuring they are truly optimised in terms of yields and risk/return profiles.
Around two-thirds (66%) of professional landlords disposing of assets say they are bearish about the market while 24% say they cannot afford to upgrade portfolios to comply with new sustainability regulations such as Energy Performance Certificate rules in England and Wales.
However, given market uncertainty, many investors will likely be waiting for opportunities to buy at reduced cost with a view to longer term value creation, re-purposing assets (as Handelsbanken is seeing) and / or capitalising early on shifts in working patterns back towards more office usage.
That belief is also reinforced by the fact that 58% of our sample said they are looking to increase their exposure to commercial offices, and just over half, perhaps surprisingly, are looking to increase their exposure to retail property. The research shows that there is still strong confidence in UK property as an asset class.
Simon Bradley, Chief Credit Officer, at Handelsbanken said: “While our Professional Landlords Survey shows how they are positively managing the current challenges within their sector, it also reveals a clear ambition for future investment, by taking advantage of forecast market movements and adding value through active management.
“In our experience of the market, investors will require significant investment to meet current tenant demands for greater amenities to achieve meaningful returns.”
The research comes amid heightened interest in the property sector with both residential and commercial areas undergoing price corrections. Higher interest rates and lack of housing supply are also presenting challenges.
James Sproule, UK Chief Economist at Handelsbanken said: “In contrast to owner-occupiers, professional landlords will often have a more detached and less emotional view of property values and are more likely to act in a way that recognises market realities. That’s why we are seeing landlords sensibly paying down debt, while others are increasingly alert to opportunities in sectors such as offices.
“More broadly, with interest rates still rising, it is difficult to see residential prices stabilising in the short term. At least with inflation remaining well above its target level nominal prices will not reflect the real full impact of price declines. Looking forward, the peak of interest rates, likely to be in August, will set the scene of a price recovery in the autumn and early 2024.”
This research follows Handelsbanken’s inaugural property report in 2022, conducted amongst SME landlords with a minimum of four properties in their portfolio. On average, respondents owned 7.5 properties with an estimated total market value of £2.76 million.
[1] 62% of the sample classified their business as “real estate investment” while 22% classified their business as “landlords” (residential and commercial) and 16% classified it as “property management.
Andrew Stanton Executive Editor – moving property and proptech forward. PropTech-X
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