The news that professional investors watch to decide whether to invest
Savvy property investors watch the news for signs that residential investment property prices in the UK could move higher. Experience combined with market knowledge tell professionals whether they should buy now, or hold back.
Although the market bears will bleat on about Brexit, there are some compelling signals that UK residential property prices will rise again throughout 2018.
Here are seven of seven national data points that bode well for investors in UK property.
1. Unemployment is low and falling
People who are working like to be rewarded for their efforts. One the biggest rewards are buying their own home. It is a measure of success and an asset that will increase long-term wealth. Homeownership also makes people feel more secure about their future. The more people in work, the more people can buy their own home.
In November, the Office of National Statistics said that unemployment had fallen by another 59,000 in the three months to September. The unemployment rate remains at 4.3% – the lowest since 1975.
2. Mortgage activity is strong
With more people employed, you would expect mortgage activity to be stronger year on year. There will always be dips in demand from month to month. Applications are affected by upcoming Budgets, and expectations of interest rate rise, for example. But, if the mortgage market is stronger over a longer period, you would expect this to be good for residential property prices.
In October, UK Finance announced that £23.1 billion was lent on mortgages in October 2017. Remortgage numbers rose most, as homeowners and investors moved to lock in rates ahead of the Bank of England’s increase in the base rate. New mortgage applications dipped ahead of the Autumn Budget. Overall, mortgage business was 14% higher than the same month in 2016.
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3. Mortgage lenders are on the side of buyers
When mortgage lenders actively encourage homebuyers to purchase with lower interest rates, it’s a sign that the market is competitive and could be moving higher. Especially if lenders side with first-time buyers. Cheaper loans mean more manoeuvrability for buyers. Sellers find it easier to ask for higher prices.
When the Bank of England raised the base rate in November, most lenders matched the 0.25% increase in their mortgage products. But that move is being reversed by some lenders on certain products. For example, Yorkshire Building Society and Virgin Money have both recently cut rates for buyers with small deposits, to 3.39% and 4.09% respectively.
Average rates for buyers with larger deposits and wanting five-year fixed rates are lower than they were a year ago, despite the base rate rise.
4. Mortgage arrears are falling
Banks don’t like repossessing homes but are forced to if mortgage arrears are too high. When mortgage arrears fall, repossessions follow suit. The market is more able to withstand higher interest rates. People find it easier to move to a new house. Falling arrears is a sign of a healthy property market.
On 13th November, UK Finance published mortgage statistics for the third quarter of 2017. These showed that the number of mortgages in arrears of 2.5% or more fell to 88,300 – the lowest level since 1994.
5. House prices are moving steadily higher, despite gloomy forecasts
When the market doesn’t reflect property price forecast or the scaremongering of so-called property experts, you know that the property market is in good shape.
Post the Brexit vote, the doom and gloom merchants rattled the housing market in the UK. Many experts forecast a collapse in the economy and a crash in the property market. In fact, nothing could be further from the truth. In its November release, the ONS said that average house prices in the UK had increased by 5.4% in the year to September 2017. The rate of growth increased from 4.8% in August 2017. From the ONS UK house price news release:
“The North West showed the highest annual growth, with prices increasing by 7.3% in the year to September 2017. It was followed by the South West (6.6%) and the East Midlands (6.4%). The lowest annual growth was in London, where prices increased by 2.5% over the year, followed by the North East at 4.4%.”
6. New home starts are increasing
A major indication of better times to come is when the housebuilders start building more homes. They won’t build unless they are confident they will be able to sell those properties and make a profit.
The Department for Communities and Local Government announced in August that new build starts in the year to June 2017 had increased by 13% compared to the corresponding period to June 2016.
In October 2017, Britain’s National Housebuilding Council announced that applications to build new homes had hit their highest level for 10 years in the three months to September 2017.
7. Houses start selling above the asking price
Most homes will sell below the asking price. Sellers chance their arm at a high selling price. Buyers chance theirs with a low bid. Buyers and sellers come to a happy compromise somewhere below the asking price. Only in a rising market are you likely to experience buyers paying more than the asking price.
In its latest market report, NAEA Propertymark noted that the number of properties selling above their asking price rose for the first time since July, to 4%. Correspondingly, the number of properties selling below their asking price dropped by 4% (to 78%).
Where are the best places to invest in UK property?
As you can see, what is happening on the ground is somewhat different to what those doom and gloom merchants would have you believe. Many investors who have spoken to us were put off from investing in 2016 because of what they read in the newspapers and heard on the news. They have missed out on capital growth of 5% to 10% and more in some locations.
The indications are that 2018 will see more growth in the UK residential property market. But not all locations will perform equally. To discover where the best places to invest in property UK are for 2018, contact one of the Gladfish team on +44 207 923 6100.
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