Ying Tan is founder and chief executive of Dynamo
The UK housing market is a multi-faceted beast containing hundreds of micro marketplaces.
Each have their own collection of conditions and challenges which have evolved over the years in a variety of ways for homeowners, landlords and tenants.
In any evolving marketplace it’s important for all links in this chain to closely follow market trends. So, let’s start by evaluating a selection of trends which emerged in 2019.
Data from NAEA Propertymark suggested that, over the course of 2019, demand was slightly higher than last year with an average of 320 house buyers registered per branch, compared to an average of 318 throughout 2018.
Looking back over the past decade, demand was reported to be up 16%, from 275 per branch in 2009.
The number of properties available to buy didn’t significantly change year-on-year, with 39 available per branch throughout 2018 and 38 in 2019.
Supply has dropped considerably over the past decade, from 65 on average per branch in 2009. The number of sales agreed per branch through the year remained the same, sitting at an average of eight per month in 2019. The proportion of total sales made to first-time buyers increased by 2% in 2019, from 25% in 2018 to 27%.
Meanwhile, ARLA Propertymark found that the supply of rental accommodation increased in 2019, from an average of 187 per branch in 2018, to 197 this year.
It reached an annual high in March, when letting agents were managing 203 properties per branch. As landlords continued to feel the pinch, the number of buy-to-let investors selling their properties remained high, at an average of four in 2019. In April, the figure spiked to five per branch.
The number of tenants experiencing rent hikes hit a record high in 2019, rising from an average of 26% each month in 2018, to 46%. This was said to be due to the impact of the tenant fees ban, with 64% of tenants experiencing rent increases in August – the highest figure seen this year.
Agents reported an increased number of prospective tenants searching for homes in August, when 76 were recorded per branch, compared to 73 on average across the year.
This analysis highlights a relatively stable year for the property market, despite buyers, sellers and investors facing lingering political and economic issues, factors which inevitably affected sentiment and decision-making.
It’s fair to say that landlords have had it tough of late. Many landlords have exited the market due to a combination of regulatory demands, tax changes and the aforementioned cloud of uncertainty, but let’s also reaffirm that the buy-to-let (BTL) sector stood firm to deliver some decent lending volumes and plenty of opportunities for the intermediary market. And the private rented sector continues to thrive across many regions of the UK.
The ongoing challenges facing all property professionals further highlights how prudent it is to get to grips with ever-shifting market conditions and keep up to speed on regional trends.
This is especially apparent across major cities within the UK, making Aldermore’s Buy-to-Let City Tracker – which analyses five factors to calculate the best areas for landlords to buy – all the more thought-provoking.
When considering average total rent, short-term yield, long-term return through house price growth over the past decade, vacancy numbers and the rental population, the tracker identified Oxford as the number one conurbation with a total score of 74.
The data showed that 28% of the city is housed through the private rented sector, the average price per room is nearly £600, properties are generally not vacant, and house price growth is strong.
The score was dragged back by short-term yields, which the lender reported as being poor.
It will be interesting to track how these cities perform over the course of 2020 and if any emerge from the pack to challenge for the top spot. Inevitably, much will depend on the fall-out from the General Election and any impact this might have on the property market.
So, what do landlords think their biggest challenges and opportunities will be in 2020 and beyond?
According to a study from Monmouthshire Building Society, nearly half (45%) of landlords believe the economy will deteriorate and 53% think legislation around tenancy and eviction will get worse for landlords.
However, on a much more positive note, despite the potential challenges of tax and legislation, nearly a third of the landlords surveyed said they were interested in growing their portfolio over the next few years and nearly two-thirds (71%) think demand for rental properties will increase.
There was also interest in building diverse portfolios, with a fifth of landlords considering investing in a property type they don’t already have in their portfolio. Holiday lets were highlighted as a growth area with 64% of new landlords having a holiday let property in their portfolio.
It’s always interesting to hear from medium to smaller-sized building societies and specialist lenders as these really are at the heart of the modern BTL marketplace and have their finger firmly on the pulse in terms of what their landlords and intermediary partners really want.
And despite their relative individual size, these will continue to have a major collective influence on the BTL sector in 2020.