How do you know what investment news to believe today?
It’s hard for property investors to know what to make of UK property investment news these days. There is so much spin put on data releases and so much investment news that contradicts.
We’re told that demand is down and supply up. Then we’re told that supply is down and demand up.
We’re told that the cut in stamp duties for first-time buyers has had no effect on sales, then we hear that first-time buyers bolstered the housing market in 2017.
We read that new home building is falling, and then that new build numbers are up.
Last week is no different.
In this week’s investment news article, we highlight the type of news that makes it so difficult for investors in today’s market. We also report on research and statistics that provide evidence of what we have been saying since the UK electorate voted for Brexit: UK property investment will continue to be profitable.
Affordability is the lowest it has been for a decade
When measured against average wages, property in Britain’s cities is the least affordable it has been since 2008, according to a report in This is Money.
In 2008, the average property price in a UK city was £182,467. At the end of 2017, this had increased to £232,945. That’s a rise of 27.7%.
Meanwhile, during the same period, the average city wage increased from £28,879 to £33,420: an increase of just 15.7%.
Consequently, in 2008 the price-to-earnings ratio of houses to wages was 6.3. This fell as low as 5.6 in 2012. Since then, this ratio has increased to 7 today. In some cities, such as Oxford, Cambridge, and Greater London, this measurement of property affordability is now above 10. Homebuyers must pay more than 10 times their salary to buy a home!
The most affordable cities in England are found in the North of England, Yorkshire, and the West Midlands, where the price-to-earnings ratio is between 4 and 6.
Hold on… mortgage and rental affordability are the highest it has been for 10 years!
Here’s the contradiction. On the one hand, you read that affordability is the worst it has been for a decade, and then along comes Emoov, who tells you that affordability is the best it has been for a decade!
Yes, you read that right. The Emoov research uses ONS data and concludes that:
- Homebuyers pay the lowest ratio of their household expenditure in mortgage interest since 2007 – 3.77% compared to 7% in 2007.
- Renters pay just 8.52% of outgoings on their rent. That’s the lowest proportion since 2011.
Landlords are despondent… oh no, they’re not!
In mid-January, the National Landlords Association said that a fifth of its members was planning to sell properties, as the buy-to-let environment continued to deteriorate under the pressure of tax and regulation changes.
Then, last week, a Paragon study of the private rented sector found that landlords are confident about 2018. Its ‘Trend’ report shows that:
- The average number of properties owned by landlords is 13 – the same as the long-term average since 2007
- Gross rental return averages 6.3% – the same as the average for the last 10 years
- 30% of landlords think that demand is growing or booming – higher than the 20% who thought the same in 2009
- Average void periods have not changed from the long-term average in six years
- More landlords expect to buy more properties than they did a year ago
John Heron, Paragon Managing Director, concludes: “Despite much noise to the contrary, and while some landlords have responded to a turbulent market by selling property, we’ve seen no material evidence of a mass sell-off by landlords. What we continue to see is strong performance of property portfolios, with a long-term upward trend in values and a stable outlook in portfolio size and returns.”
So, how does an investor know what investment news to believe?
Understanding the property investment news takes experience and research. You must understand which data releases are realistic, and which are opinionated. You must be able to decipher the spin put on statistics, forecasts, facts, and research.
There’s an easy way to do this. Contact one of our team today on +44 207 923 6100 and sign up for the Gladfish Newsletter to stay abreast of all the property investment news that matters. We give it to you straight. No BS. No hype.
Live with passion
Brett Alegre-Wood
