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Industry Roundup – May 2019

Our May round up is a quick overview from the property industry including the slowdown of house price growth and weathering the storm of Brexit – Welcome to the May Round Up

Hometrack

The slowdown of house price growth has now extended beyond southern England. In the near term, it is expected that adjustments will continue across London and extend further across the South. For regional cities, above-average house price growth is expected where employment levels continue to grow and affordability remains attractive. Demand for housing in regional cities has been strong recently and house price growth has expanded beyond the growth of average incomes.

Lower mortgage rates have supported increased buying power and higher prices but the impact is weakening, with new regulations limiting the ability of households to push affordability and mortgage rates bottoming out.

Short-term potential for savvy investors

While London house prices have dropped by 3.8% overall, London boroughs vary significantly in terms of house prices and rental yields. For investors and landlords interested in short-term profits, increases in net rental yields and decreasing house prices in the capital represents a unique opportunity.

ONS data shows that multiple London boroughs including Tower Hamlets and Wandsworth have all had a drop in property price but experienced an increase in rental yields. The highest yields were in Tower Hamlets (3.4%) and Lambeth (3.3%), making them an appealing prospect for investors.

UK property weathers the Brexit storm

80% of respondents to the May Reuters poll believe the UK market has ‘weathered’ Brexit uncertainty, with price rises expected to be fairly robust. In the same poll, economists detailed how London prices are expected to rise by 1.0% in 2020 and 2.5% in 2021 following a resolution to Britain arranging a free-trade deal.

“The UK market has remained remarkably resilient,” said Russell Quirk at property website Vyomm.com. “So, just imagine the enormity of the ‘happy-ending’ that will prevail when the current political paralysis ends.”

Already, we can see that following Brexit’s postponement, investors that were delaying a purchase have decided they can’t hold off any longer. Shaun Church, director at Private Finance said:

Since the UK’s date of departure from the EU was pushed back until October, we’ve already witnessed a resurgence in activity that will help to add even greater buoyancy to house prices and the wider market over the course of the summer.

“Deal or no deal, Brexit or no Brexit – for now, it appears that the property market is progressing regardless. If this new found confidence can be maintained, it should allow the market to return to a stronger state.”

Shortage of rental properties driving increased rents

Property undersupply continues to have a significant impact on the market, an effect that is amplified in the capital. A shortage of rental properties in London is driving the average rent up and increasing yields, with South West London outpacing the rest of the capital in rent rises.

As landlords continue to leave the London market, the number of properties available to renters is decreasing. For investors, this means more opportunity to secure short-term rental profits over the traditionally-favoured long-term strategies.

Rising interest in UK property from overseas

Searches for UK property from overseas buyers has almost doubled in 2019 compared to 2018 figures. Since the UK voted to leave the EU, property portal Placebuzz has seen UK property searches from overseas investors amount to 6.2% of activity, compared to 3.6% a year ago. This shows a tangible interest from international buyers that want to capitalise on softening property prices amidst Brexit uncertainty.  

Regional cities were the focus of these international searches, with Birmingham and Glasgow the most sought-after. As these cities continue to offer higher yields and more affordability, expect them to remain more popular than London.

We hope you enjoyed the May round up and were able to gain some valuable insights in the property industry.

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