UK Sales Market Update

Welcome to our Property Market blog, where we provide you with insightful information on the latest trends in the housing market. In this edition, we'll focus on the sales market, highlighting key statistics and offering valuable insights for both buyers and sellers.

 

1. Transaction Stats:

In January 2023, there was a 10% reduction in property sales recorded year on year, while new home purchases saw a 9% rise in completions. Mortgage approvals experienced a significant 46% reduction, with gross lending down approximately 7%. The decrease in mortgage approvals from the second half of the previous year largely explains the significant difference in lending statistics.

 

2. Buyer Demand:

According to the latest ARLA Housing Insight Report, there was a 30% fall in the number of prospective buyers registered across member branches in April 2023 compared to April 2022. Additionally, member branches reported a 70% increase in properties available for sale year-on-year. These figures indicate a drop in buyer demand, likely influenced by higher mortgage rates and economic challenges affecting affordability.

 

3. Market Activity and Pricing:

Rightmove reported that agreed sales numbers are currently just 3% behind the pre-pandemic market of 2019. The average price of properties coming to the market experienced a 1.8% month-on-month increase in May, reflecting robust activity levels and confidence. Sales agreed in May showed positive growth, and the level of negotiation from the asking price to the sale agreed price remained steady at around 3%.

 

4. Mortgage Rates and Affordability:

Despite an increase in the Bank of England base rate, mortgage rates have remained steady. The average 5-year fixed rate with a 15% deposit is now 4.56%, significantly lower than the 5.89% recorded last October. This decrease in mortgage rates contributes to maintaining home mover confidence in the market outlook.

 

5. House Price Growth and Market Activity:

The Zoopla house price index reveals a year-on-year price growth of 1.9%, the lowest in recent times compared to the 9.6% recorded a year ago. Prices have fallen by an average of 1.3% in the last 6 months due to higher mortgage rates and rising living costs. However, buyer confidence has improved, resulting in an increase in sales agreed, primarily driven by falling mortgage rates during the Spring.

 

Regional Property Price Movements:

The West Midlands region has seen year-on-year price growth of 3.5%, surpassing the national average of 1.9%. Birmingham ranks second among major cities, with a growth rate of 3.8%, just behind Nottingham at 3.9%. These figures indicate a significant difference compared to last April when the year-on-year price increase approached 10%.

 

The Outlook for the Sales Market:

Market activity in the UK sales market remains comparable to pre-pandemic levels. However, predictions suggest that mortgage rates may increase in the second half of the year, impacting affordability and pricing. It is anticipated that the year-end may see approximately 20% fewer transactions than the previous year. Sensible and realistic pricing is crucial for sellers, while buyers should not be discouraged as long as the numbers align. As the year progresses, increased stock levels may provide negotiation opportunities.

 

Conclusion:

The UK sales market demonstrates resilience, with activity levels approaching pre-pandemic norms. Understanding market dynamics, considering pricing strategies, and staying updated on mortgage rate changes are vital for both buyers and sellers. Seek professional advice and remain adaptable to navigate the ever-evolving property market successfully.

Thank you for reading

What Is The Rental And Property Investing Market Like In Liverpool Right Now?

We have let thousands of tenancies, worked with hundreds of investors, and managed hundreds of properties, helping landlords navigate the local Selective Licensing schemes since their inception in 2015.

Like tenants, landlords and investors come in all shapes and sizes, have different levels of experience, and have different wants and needs, but there are a few questions that we get asked all of the time, and right now, it seems like everyone wants to buy property in Liverpool and the surrounding areas... and I can see why.

We have been instrumental in letting property in and around the west of Liverpool for over 10 years now, our focus; to work with the landlord investors in the area.

We have let thousands of tenancies, worked with hundreds of investors, and managed hundreds of properties, helping landlords navigate the local Selective Licensing schemes since their inception in 2015.

Like tenants, landlords and investors come in all shapes and sizes, have different levels of experience, and have different wants and needs, but there are a few questions that we get asked all of the time, and right now, it seems like everyone wants to buy property in Liverpool and the surrounding areas... and I can see why.

There's a lot of investment opportunity in the area with great property prices compared to many other city locations, and will generate fantastic income (and now capital) returns.

So, if you are thinking of buying a property in the area, here are a few questions you should be asking yourself.

 

What are the most in-demand areas from tenants at the moment?

The top areas that are most in-demand from tenants right now are Bootle, Walton & Fazakerly.

 

What sort of property cannot you get enough of? 

There appears to be a real shortage of 2/3 bedroom houses, maybe because people want more space or a place to work from home, we have all experienced being locked in, and a 1 bed flat can become less desirable. 

 

Where are most investors looking to buy at the moment? 

Most Investors are looking to buy property in Bootle & Walton, which ties in nicely with the increased tenant demands we are seeing. 

 

What rent increase levels have YOU seen in the branch? 

With rents across the UK increasing on average by 8.5% (according to Homelet), we have seen rents across the board here increase by at least 10% over the last year and in some cases a lot more! 

 

What property price increases have you seen in your area?

According to the Liverpool Echo, Liverpool has the fastest rising house prices of any UK city. This year is set to be the busiest for the UK housing market since 2007, with Liverpool topping the house price charts at 10.6% and some areas such as Toxteth maxing out at over 20% in just 12 months.

 

Are unfurnished properties renting better than furnished? 

We find that most properties rent better if they are unfurnished, that is unless they are a house share or student accommodation, then of course furnished is best.

 

What are the key features tenants are asking for right now?

Of course they still want the usual, a good location that feels safe, a nicely presented property that’s clean and has good access to facilities and transport, but this year we have seen a rise in tenants asking for gardens, and to be allowed pets (probably due to the experience of lockdown), and with HMO’s they really do all want en-suite facilities (due to becoming more germ aware). 

 

How many applications from tenants are you getting per property?

During most of 2021, we were seeing around 10 applications from tenants per property, however, this year it has more than doubled, we seem to currently (January and February) be getting up to 25 pre-applications for each property, it's gone crazy!

 

If you were looking to buy a property right now Elisha, what would you buy?

If I was to buy a property now, I would definitely be looking to secure a 3-bedroom terraced house for around £130k, generating me a monthly rent of around £750pcm which results in a 7% gross yield, because I know I could rent it over and over again with zero problems and get good quality tenants.

 

What sort of landlords are buying at the moment?

It seems all types of landlords are buying at the moment, from 1st-time landlords, those with 1 or 2 properties looking to expand their portfolio and large landlords alike, it feels like everyone is buying right now, it’s a very busy market, driven in the main by the huge increase in demand and the shortage of stock out there.

 

What’s the big challenge for the Liverpool market at the moment?

It has to be the introduction of another Selective Licensing scheme across Liverpool from April 2022. This is going to be an additional cost and more paperwork for those landlords in the areas affected, but we have been through this before with Sefton, so we are ready to support our landlords through it.

If you have any queries regarding any of the subjects covered in this article or want to learn how the introduction of the new Selective Licensing laws could effect you as a landlord in the Liverpool area, we're running and inviting you to a free-to-attend webinar on the 23rd March 2022 at 18:30. On the webinar, we will cover all the nitty-gritty details you should 100% be aware of.

Register for the webinar on the next page.

Things you should consider before you rent out your property (Part. 1)

When you are preparing your property for rental, what’s the first thing that comes to mind? What are the things that you look for when you are checking the home for potential tenants? Is it the standard of the décor? The appearance of the carpets and flooring? It’s likely that you will be looking at these things, envisaging it through the eyes of the tenant – but before you even take those things into consideration, you should be thinking about safety.

When a tenant looks around the property, they won’t be able to see whether or not the electrics are up to standard. They won’t be wondering whether the boiler has been serviced. Because they will expect that you, as the landlord of the property, to have done all of the work required to make sure that the property is safe. Don’t let those things escape your attention, as these are the things that could cause you the most problems down the line.

Our advice, particularly to first-time landlords, is to focus your attention on the safety first, before anything else. It really doesn’t matter if the property isn’t ultra-modern in its décor or furnishings – first and foremost, it needs to be completely safe.

Make sure that you take the time to check your compliance with Gas Safety Regulations, that you have adequate smoke alarms placed in key places throughout the property (and that they are in full working order), and that you have fitted carbon dioxide sensors in places where there are risks.

Touching a bit more on that – if your property has an open fireplace, regardless whether it is used or not, it is essential that a carbon dioxide sensor is fitted nearby – if, as has happened in the past, the tenant decides to go against your advice and use the fireplace, then you as the landlord would be liable.

All aspects of safety for the property are the responsibility of the landlord. Keep all safety checks, such as electric and gas etc. up to date – that way you have proof if something were to go wrong.

Make sure it’s clean

This seems pretty obvious, but always make sure that the property you are renting out is clean before you show it to potential tenants. There is nothing more off-putting than walking into a home which has a bad odour, grubby door handles, and unsightly marks on the carpets.

The cleanliness of a property is the first thing your potential tenants will notice, so if you are unable to get it up to standard yourself, make sure you get a professional cleaner in to get the jobs done for you.

Key things are:

Remember; if the property is in a clean and tidy state when the tenant moves in, then they are more likely to keep it that way. And of course, you can insist that when they vacate the property, they leave it in the same condition as when they moved in – this will be noted in both your contract and your inventory.

Present to suit your market

This is something else that is often overlooked – presenting your property to attract the type of tenant you want. You’ll want to take into consideration the kind of area the property is in, and the demographic. If you’re in an area of town where there are a lot of retirees, then you should make sure that the property is set up and decorated in such a way to attract an older clientele. If it’s somewhere that tends to attract professional couples, then they will be more attracted by modern décor and slick modern appliances. And families will have different requirements again.

Something else to consider is, how will you attract the kind of tenant that you want? For example, if your property is a bit run down, hasn’t had any investment in the overall décor, kitchen, bathroom, then think about the grade of tenant that you’re likely to attract.

And to add to that, the more you are willing to invest in getting your property modernised, the higher rent you’re likely to get for it, as people are willing to pay for the convenience of having modern appliances, adequate storage, a good number of plug sockets to suit their needs, and any little modern touches that will make their lives within the home easier and more comfortable.

Of course, these are just a few of the many things that you as a landlord will want to consider when you rent out your property – join us for part 2 of this series where we will guide you through some more of the requirements and legalities you will face when looking to fill your property.

Need advice? Call our office on 01902 421405 where we will be happy to help you to get the right tenants for your property.

Alternatively, download our FREE 'SELL YOUR HOME FAST' guide here.

You Can No Longer Charge A Deposit For Pets – Here’s What You Need To Know

Due to the introduction of the recent Tenant Fee Ban, there have been a lot of changes to what we as landlords and agents are able to charge for. One example of that is the deposit for pets. If you are a landlord who allows your tenants to have pets, then that additional deposit you used to charge to cover any damages or cleaning bills caused by pets is no longer allowed under the new bill.

Letting to pet owners

Whether you’re for or against, there is undeniably a huge appetite for properties which allow tenants with pets. It’s estimated that up to half or renters are also pet owners, which creates a bit of a dilemma – should you allow pets or not?

If you have previously been pro-pet, things have recently changed with the new Tenant Fee Ban, because now, landlords can no longer charge an additional deposit for tenants with pets. It’s yet another chunk of money gone from our previous income – so what should you do?

Your options

OK, so you could stop allowing pets for future tenants. Or you could continue to allow pets, and suck up the cost. But there is something which would benefit both you and the tenant, and it’s actually a pretty obvious solution…

How to change what you charge for pet owners

It’s perfectly within the rules to ask tenants with pets to pay an additional rental charge. For example, if you are offering a property for rent at £600pcm, you are allowed to advertise that an addition is chargeable for pets. So you could say something like “£600pcm, or £650pcm for pet owners”.

Why this is the best option

There are definite advantages to having pet owners as tenants, the most obvious one being that it greatly increases your pool of prospective tenants. And let’s dispel the myth – most pet owners are actually pretty decent and responsible people, who will do all that they can to keep your property in good condition.

If you charged a deposit in the past for pets, let’s say for arguments sake, a cost of £250. So at the end of the tenancy, you have an additional £250 to cover thing like, carpet cleaning, dealing with scratches on the walls or doors, disinfecting for odours etc.  When you add all that up, your £250 doesn’t seem like such a good deal.

But if you charging a ‘rent’ for those pet, you’re getting a consistent amount of money, which can cover ongoing costs for these things. And because you’re allowing your tenants to have their pets in the property, chances are they’ll stay in it for a longer term, will make more of an effort to take care of the property, and you’ll be recommended to their pet-owning friends as a great landlord.

It’s actually quite encouraging – and for pet-owning tenants, good news, as it could mean that more landlords are able to meet demand and provide accommodation for pets without having to worry too much about the cost to them.

Has The Tenant Fee Ban Encouraged Recent Rent Hikes?

There have been several reports over the past month suggesting that landlords have begun to increase their rents by as much as 22% since May. These same reports say that the hikes are due to the recent Tenant Fee Ban, but could there be other factors also in play?

Since the introduction of the Tenant Fee Ban earlier this summer, landlords all over the UK have been thrown into disarray due to a huge drop in income – the Ban has meant that landlords can no longer charge new tenants any upfront fees for services such as inventories and administrative costs, and this has led to a massive fall in income of up to 30% in some cases.

The fallout became apparent in June, where reports show a significant increase in rents following the Ban – a pattern which we also saw in Scotland when their Ban came into force earlier in the year.

Seeing the results from Scotland, Government made efforts to warn landlords not to increase rents, but look at other ways to increase income. But with the added pressure of changes to Section 21, and changes in demand for housing, the industry as a whole is being forced to raise rents in order to evolve and survive the upheaval within the property sector.

Other factors in rising rents

All of the changes in the industry, a combination of the Fees Ban, Section 21, and general cost increases, have come together to put pressure onto landlords, and we have seen a decrease in the number of landlords investing in new properties. Many letting agents have reported a drop in the number of managed properties on their books, and it’s not yet certain whether this is due to landlords saving costs by trying to manage the properties themselves, or whether they are simply ‘cutting their losses’ and selling up.

If there are, as predicted, less rental properties on the market over the coming years, the increase in demand for them will also mean that landlords and agents can secure those higher rents, because there is likely to be much more competition, especially in those more sought after areas, where people are not able to afford to buy on a mortgage.

Optimistic

Despite all the odds, though, it does seem that the majority of landlords and agents are optimistic about the future of the lettings industry.

The property sector, especially lettings, has always had the ability to ‘roll with the punches’, and adapt – perhaps because changes are so frequent that we have all come to expect it and learned to evolve more readily than other industries.

There will always be a need for good housing in the UK, and it looks like for the foreseeable future, there will be a rising demand for rental properties, and as long as landlords and agents can continue to work together to improve the property market and keep up the excellent standards that tenants have come to expect, then despite rising rents, they will seek out properties knowing that they are still getting value for money.

The Future of Lettings

There is an upside to all of these changes – because those landlords who stay the course will be the ones who can offer a higher standard of accommodation, can keep up with legislation in order to keep tenants safe and the property in good repair. In short, it may be, in the long term, a way to shake up the industry in order to bring it up to the standard we’ve all come to expect.

Should I concentrate on capital appreciation in buy-to-let?

The growth of the buy-to-let market isn’t slowing down, as the housing shortage in the UK continues. Because of this, you now see a lot of information out there to help landlords get the best rental yields for their properties, but interestingly there is less information on capital appreciation. More associated with buyers and vendors, capital appreciation is also a factor that landlords need to consider when they invest in property, now more than ever.

What is capital appreciation?
In comparison to cash flow, which is money that goes straight into your back pocket, capital appreciation is the profit made on an asset that has not yet been liquidated. Many investors use property for appreciation due to being one of the more reliable assets.

Investing in private rental properties is more often than not a longer-term commitment compared to refurbishment projects and other types of property investment. Therefore, it’s in a landlord’s best interest to look into the capital appreciation potential of a property for when they or their successor eventually sells them. It’s not worth investing in a rental property only to lose capital once you leave the sector.

Why should you think about capital appreciation? 
If you’re looking to boost your personal income – maybe you’d like to add more to the retirement fund or raise more money to help out family -  then it would be wise to consider capital appreciation opportunities.

Once you reach pension age, you could stand to have a good nest egg to fall back on, especially since properties in the UK are increasing on average by 24% in value over 10 years.

Things to consider for capital appreciation

1)    Buy an asset you can actually liquidate. It’s okay investing in properties to create some steady cash flow, but if the property is difficult to sell or in a poor location, then you could end up losing more capital than you earned overall. This is called capital depreciation. Look for properties in up and coming areas or areas going through regeneration. According to statistics, you could stand to gain up to 25% in value on a property over just 5 years if a new supermarket is built in the area.

2)    Budget correctly and be aware of your net income. Only invest in properties you can genuinely afford – this includes décor and furnishing, maintenance and repairs, mortgage fees, taxation and utilities that match its size and build.  The mortgage tax relief cuts introduced by the government last year only heighten the need for you to plan your budget carefully. Pushing yourself to invest in properties that generate a large gross income will end badly if you can’t manage the financial upkeep. You could end up cancelling out any rental yield you make for a number of years, but even worse, you could end up in debt with a need to liquidate quickly. You want capital appreciation to boost your income, not make up for your losses.

3)    Be a good landlord. Don’t allow your property to become run-down and filled with bad tenants; it could influence the reputation its area has and thus decrease its market value. Looking after your tenants and ensuring a well-kempt property is heavily linked to how much the property will be worth over time. 

If you’d like to focus on capital appreciation when making a buy-to-let investment, a consultation with a local property expert is highly recommended. Many of our local Concentric branches offer buy-to-let advisory workshops, where you can get advice and guidance tailored specifically to you. Click HERE to find out more.

A quick guide to converting HMOs

With property prices ever increasing and successive governments taxing income from property more and more each year, landlords and property investors are often  turning to houses of multiple occupation sometimes known as HMOs for higher rates of return.

So why do HMO give landlords and property investors a higher rate of return?  Well essentially this is down to the fact that HMO properties are rented out by the room rather than as a whole property. 

So how do you achieve these higher rents and higher rates of return? 

What you do is you create a situation for individual single tenants where the rent is affordable. Note the word affordable here. We're not saying that it wouldn't be cheaper to rent a whole property if you were say in a couple or in a group but if you are renting on your own and have no one to share the costs with then renting a room in a shared house will ultimately be cheaper.

So what creates an attractive proposition for such a single tenant? 

Well I would say first of all it is having a room in a house which is literally ready to go. Nothing more required than bringing your own small possessions and clothes and getting settled in.  

Why is this important? Because it keeps costs down and it allows people to move quickly. 

What this means to you as someone thinking of converting a property into an HMO is that you need to ensure that the rooms large enough to be comfortable and that the property is sufficiently furnished and well equipped - to all intensive purposes so it’s ready for someone can move into it in the same way they would a hotel room.

You also need to ensure the property that you are thinking of converting into an HMO is in a location which your tenants will want to live in. Please see my article on choosing the location  for are HMO for more details on this.

But what about the legal constraints for creating or converting an HMO?

You may have heard that there is a lot of legislation surrounding converting and running an HMO and you'd be right. Due to the nature of HMOs and the number of people that live in them, there are naturally concerns about ensuring that the occupants are safe and secure. Iit is no longer a situation where there is a single family unit where people are looking out for each other but instead 5 or 6 individuals and it can't be it can't be assumed that they are all cooperating in keeping the property safe.

So what can you do as a landlord to ensure that you stay on the right side of the law when converting a regular residential property to an HMO? 

Firstly I would say invest in your own education.  There are plenty of courses run by industry experts who will teach you everything you need to know relating both to the legislation and the practicalities of converting a property to be a compliant and functional HMO.

Secondly, speak to a local agent you have a working knowledge of he knows not just from a theoretical point of view from the practical experience of actually letting and managing them.  take it from me there a lot of different skills and knowledge required to safely and successfully let and manage an HMO.

Thirdly, don't underestimate the amount of time which managing as an HMO will take.  you may think at the outset it is just a large terraced house but if it is 6 bedroom HMO then in reality what you have are six houses with six separate tenancies 6 separate tenants 6 lots of questions problems rent to chase and other usual repair and maintenance issues.

As a landlord myself and having managed my own and families properties myself I can attest to the fact that whilst it is perfectly possible to manage one rental property what even 2 or 3 whilst holding down a full time job it is very difficult to manage any more than that and retain a healthy work life balance.  This is why I say to any landlords or property investors thinking of buying or creating / converting a property to an HMO, factor in the costs of professional management.

Is there any specific legislation which you should be aware of?

The short answer is yes lots but in a nutshell the main things you need to bear in mind or and this is in no particular order

For more help, information and advice about converting the residential property to an HMO what any other aspects of owning, letting or managing an HMO in Birmingham please contact us on 0121 405 0389.