A brief case of clarity
Joe Arnold is managing director of Arnold & Baldwin
Amongst the ongoing uncertainty of Brexit, the country’s attention shifted, briefly, to the Budget last month and the Chancellor’s briefcase did at least contain some clarity for housebuilders and developers by extending the Help to Buy Scheme.
The scheme was originally due to end in 2021 but will now continue until 2023, but only for first-time buyers and with new lower limits.
Following on from this extension of a scheme that has done so much to boost the new build market, the government has also said it plans to introduce a New Home Ombudsman to protect the interests of homebuyers and hold developers to account.
A report from the New Homes Review found that nine out of 10 new homebuyers surveyed had found defects in their houses, indicating the scale of the current problem and the value of a proper survey even on new property.
In the current market, RICS has reported that virtually all UK regions saw a further decline as average stock remains very close to an all-time low. Furthermore, there appears little chance of any meaningful turnaround, as a net balance of 30% of surveyors reported the number of appraisals to be down on year-on-year basis. Given these conditions, it is little surprise that sales remain subdued, with the third consecutive monthly decline in transactions.
RICS says there has also been a fall in interest from new buyers, leading to an increase in the number of properties for sale, which is exerting negative pressure on house prices.
But there is more positive for landlords. Jackie Bennett, director of mortgages at UK Finance, said: “Buy -to-let home purchases eased again in September suggesting lending in this market remains subdued as a result of recent tax, regulatory and legislative changes.”
Fewer buy-to-let purchases means supply of rental property remains low, but demand continuing to rise, and this means increasing rents. Statistics from the Bank of England show an improvement in tenant demand and a continued fall in landlord instructions – it’s the longest negative stretch since 1999. On the back of this, rents are expected to rise over the coming months, albeit modestly.
Rightmove data supports the Bank of England, stating that the number of lettings listings in the Prime Central London (PCL) market fell 18% in the year to September compared to the previous 12 months.
While the number of tenancies agreed per Knight Frank office in Prime Outer London (POL) rose by 16.7% in the year to September. The estate agency adds that the number of new prospective tenants registering in PCL has been on an upwards trajectory since the start of the year.
This upwards trend in activity indicates the lettings market in POL has been more immune than the sales market to current political uncertainty, the rising demand coupled with falling supply suggests that upwards pressure on rental values will be sustained – providing a robust foundation for buy-to-let investments.