Almas Uddin
Founder and Mortgage Advisor
31 Mar 2021
Following budget announcements and the beginning of lockdown restrictions lifting, the UK housing market remains strong, with continuing high activity levels.
We heard this month that the government had extended the Stamp Duty holiday, and while this has been a massive incentive for many investors, it's also seen a surge in demand for residential homes.
What this means is that:
- Available housing stock has increased, helping to meet demand following heavy shortages in February.
- Competition remains high, with fast mortgage financing and quick negotiations still the name of the game in the buy to let investment world.
- More new buyers are coming into the market to take advantage of the potential £15,000 in tax savings now that this seems more viable for new transactions.
So, the big question is - what happens next? Let's take a look at some of the market predictions to help you plan your move for the months to come.
Choosing Future-Proof Rental Investments
We've recently reported the governmental changes to the Model Tenancy Agreement and how pet-friendly rentals may make for a lucrative investment. Landlords with properties where pets are permitted can charge higher premiums and secure longer-term tenants to mitigate the risk of vacancies.
However, it's also crucial to evaluate what types of properties are in the highest demand. These include:
- Semi-detached family homes of two bedrooms or more.
- Properties with gardens and outside space.
- Suburban homes within commuting distance, but with the capacity to work from home.
The critical indicator from market predictions is that we won't be seeing a sudden slump in demand or the number of new property purchases going through.
While this may be partly due to the Stamp Duty scheme's extension, it's also related to a general increase in housing prices and low buy to let mortgage interest rates - which would be very hard to beat!
Investing now means reduced taxes but also being able to lock in rates that are very likely to rise in the months to come. Many of our clients are looking at remortgaging buy to let portfolios to take advantage of the rates on offer or release capital to invest in new portfolio properties to expand their reach.
One popular option to jump on the opportunities we're seeing is to secure an agreement in principle for buy to let lending straight away, making it easier to secure an offer made and move forward with a purchase before it can be gazumped.
Predictions for the UK Housing Market
Anticipated house prices have changed once more over the last few weeks. Previously, the end of the stamp duty holiday had been seen as a turning point, at which the frantic pace of 2021 thus far would slow down.
However, this doesn't look like it is likely to happen. Knight Frank predicted a zero percent change at year-end from 2021 into 2022, which wouldn't be ideal for investors who would be expecting at least some appreciation on their returns.
There are lots of factors at play here:
- Vaccine rollouts are bringing buyers into the market that had been cautious about proceeding with a move.
- Increases in prospective buyers searching online, cited as around an 8% growth by Right Move - even related to before the news about the Stamp Duty thresholds.
- Growing optimism in commercial and professional sectors, adding to the demand for high-quality properties.
Knight Frank has now revised its prediction to a 5% growth in the UK housing market pricing, a significant improvement. Predictions going on towards the end of 2025 are estimated to be a 24% cumulative increase!
Therefore, these estimates have added to the drive for further investment appetite, with tangible improvements in prospects for bricks and mortar.
We can't be sure that nothing will change in the meantime, but having concrete estimates at this level is certain to buoy confidence in the market and encourage more landlords to consider their long-term prospects in a more favourable light.
Expected Changes to Rental Yields
Yields are doubtless a crucial metric for property investors. We always look at rental income, potential profitability and the rental yield to identify which mortgage solutions will be best suited to any particular investment.
The trends here continue to indicate that the southeast and London still aren't going to be the most attractive buy to let opportunities, with the higher housing prices making yields less appealing.
Currently, the best locations to invest in rental properties include:
- Northwest England - average property prices stand at around £196,000 with an average rental income of £766 a month and 4.69% rental yields.
- Yorkshire and the Humber - average property prices here are slightly lower at £178,000 with rental income of £677 per month and yields of 4.56%.
- Scotland isn't far behind, with an average sale price of £181,500, rental income of £687 and yields coming to 4.54% on average.
Therefore, it's crucial not only to look at having mortgage agreements in principle ready to go and selecting properties that will appeal to the current market but also to evaluate locations to choose areas where you'll get the most significant return.
Rural properties continue to see high demand, with the general appetite moving away from central city regions - but finding a balance somewhere accessible which would offer the ability to mix and match working from home and commuting is a longer-term prospect.
While some professionals are likely to return to commuting as lockdown restrictions gradually lift, it seems likely that less urban buy to let properties will retain their appeal.
The key is to act quickly and decisively to ensure you make the most of these opportunities on offer - and before mortgage interest rates rise and the stamp duty threshold reverts in just a few short months!
For information about lending products currently available on the market or for assistance remortgaging your portfolio or releasing capital to improve your investment capacity, give the Revolution Brokers team a call at any time.
Contact us now to discuss your personal options, Revolution Finance Brokers specialise in commercial and residential finance in Essex, Kent, London and Hertfordshire.
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