Property investment news continues to defy the experts
Investment news must be getting boring for the Brexit doomsayers. Property investors were told that immediately after a vote to leave the EU, the UK property market would fall into terminal decline. As we reported when we asked how Brexit will impact property investments:
- George Osborne, then Chancellor of the Exchequer said house prices would fall by 10% to 18%
- The CEBR forecast that the value of UK housing would fall by £265 billion
- Rating agency Fitch said house prices would drop by as much as 25%
- BoE Governor Mark Carney said interest rates would rise
Last week’s property investment news is more evidence that these and other experts couldn’t have been more wrong.
House prices are up and expected to continue rising
Data from the lender Halifax puts the average UK house price at £219,949. That’s an increase of 5.1% over the last year. While this rate of growth has slowed from the previous month, Halifax’s housing economist expects prices to continue rising. He says growing demand and undersupply will support property values, especially in an economy that continues to perform well and create jobs. Other recent releases from Halifax include:
- Mortgage affordability has improved significantly over the last decade
- Number of first-time buyers reaches an all-time high
The OBR now thinks house prices will rise for the next five years
In his Budget 2017 release, Chancellor Philip Hammond draws attention to the new OBR house price predictions. It now predicts that house prices will rise by:
- 4% in 2017
- 4% in 2018
- 4% in 2019
- 5% in 2020
- 6% in 2021
Further evidence (if any were needed) that now is the right time to invest in UK property.
If these forecasts turn out to be correct, a property bought for £200,000 today will be worth £252,000 heading into 2022.
Tenant demand increases, and rents expected to rise
RICS has released its monthly report on the lettings market. The demand for tenancies has grown for the third consecutive month. 15% more agents reported an increase in enquiries than a fall. Simultaneously, the number of new landlord instructions decreased by 10%.
Consequently, with more people wanting to rent and fewer new rental properties available, rents are expected to increase in the coming months. Agents responding to the survey expect rents to rise by an average of 2.7% over the next 12 months.
Over the next five years, the average rate of growth in rental prices is expected to rise to 4.4% per year. Currently, the average rent in the UK is £895 (Source: Homelets). If the RICS survey proves correct, average rents in the UK will rise to more than £1,000 by 2022.
Tenants want longer tenancies
The English Housing Survey has concluded that the average tenancy in the private rented sector is now 4.3 years. Two-thirds of tenants have been on their property for more than three years. This stability of tenancies is excellent news for buy-to-let investors.
New research from the Residential Landlords Association (RLA) shows that 4 in 10 tenants expect to rent a property for as long as ten years.
Expat investor demand grows
Scott Hendry, a buy-to-let mortgage lender, writes in Property Reporter that the number of applications from expats continues to increase. The fall in the value of the pound has encouraged overseas investors to buy in the UK property market. Investors benefit from long-term capital growth while paying their mortgages in local currency from the rents collected.
The mortgage lender has seen applications from foreign buyers more than double in the first month of the year. It mirrors our experience, with overseas property investor numbers rocketing since Brexit.
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Stop press! Mark Carney said that interest rates would rise. I think they will later this year, but Tesco Bank has just cut it's rates on its two and five-year remortgage products. A homeowner taking equity out of their home for a first-time investment could borrow from Tesco at just 1.79%.