February Newsletter: Property Prices Rise

February Newsletter: Property Prices Rise


In the February edition of our Mansell McTaggart newsletter, we are pleased to analyse the recent surge in the property market - with Rightmove reporting record price rises from December to January. With the increase in property prices, we also look at the increase in buyer demand which is creating a very active marketplace in this first quarter of the year. 

In our analytical pieces this month, we break down which property type has performed the best over the last decade - an interesting read if you are thinking of investing in 2020. If you are looking to invest in property, then you are not alone as we bring you the news that potential landlords are still keen to invest in property. 


Property Prices Rise at Fastest Rate on Record

 
Rightmove has reported property price increases from December 19 to January 20 of 2.3%; representing the largest-ever increase in prices over a 4-week period since it began its asking price index almost two decades ago. With the property market starting the year in such good health, 2020 is poised to be a strong year all round for housing.

In the 4 weeks from 8th December to 11th January, asking prices increased by over 2%, with the general election result having a strong positive effect on the market, thanks to the certainty of a majority government.

It is not just vendors who have returned to the market, with Rightmove also recording a 15% jump in enquiries over the same period, when compared to January 2019.

Miles Shipside, Rightmove director and housing market analyst, comments: “The housing market dislikes uncertainty, and the unsettled political outlook over the last three and a half years since the EU referendum caused some potential home-movers to hesitate. There now seems to be a release of this pent-up demand, which suggests we are in store for an active spring market.”

He continues: “The early birds are on it, with over 1.3m buyer enquiries to agents since the election, up 15 per cent on the same period a year ago. Some buyers are even further ahead and have snapped up a property already.”



Buyer Demand Soars

 
Recent data released by Zoopla has shown that 2020 has started in supreme fashion for the property market; with buyer demand up 26% when compared to the same period in 2018 and 2019. With such an influx of buyers, those thinking of selling their property have timed it well.  

Hometrack, the data research arm of Zoopla, have demonstrated just how much of an effect the general election and the promise of political stability have had on the property market; with demand increasing by over a quarter and house price growth across the major UK cities also hitting nearly 4%, the highest in two years.

Richard Donnell, Hometrack’s research and insight director, says: “This is partially due to fading political uncertainty; households who were holding off moving are now starting to return to the market and this momentum has been supported by low mortgage rates.

“The cities with more affordable house prices, such as Sheffield and Leeds, have seen the greatest increase in buyer demand as house hunters continue to focus on value for money this year.”

Statistics from HM Revenue show that the increase in buyer demand also had a positive impact on December’s property market, with an 11% increase in property transactions when compared to December 2018.

The research goes on to look at the strongest prospects for price growth throughout 2020, with Nottingham ranked as the number one location for prospective price increases. Edinburgh and Glasgow are ranked second and third respectively, and the traditional North South divide is set to narrow.



Potential Landlords still keen to Invest

 
Given changes to stamp duty, tighter regulations and the introduction of the Tenant’s Fee Ban last year, it’s easy to assume that there’s little appetite in the market or encouragement for landlords to invest in Buy-to-Let properties. However, a recent large-scale survey has suggested that such a sentiment is far from reality.

Perrys Chartered Accounts asked 1,000 people and discovered that close to 75% of those questioned backed the idea of investing in Buy-to-Let properties, with that number rising to 83% when looking at millennials (those born between 1981 and 1996).

Why not invest?
So, what’s stopping them? The survey noted that increased tax and stamp duty rates are understandably off-putting, with Brexit unsurprisingly playing its part in making buyers think twice when deciding to invest.

What can be done to encourage investment?
Investors will likely all note that a decrease in stamp duty would be preferable, and a similar sentiment is shared in Perrys’ survey alongside a wider selection of tailored mortgage products. Interestingly, over one fifth of those questioned were keen to explore alternatives to long-term property investment with longer tenancies, such as short-term lets.

Preparing for the future
When it came to detailing reasons for wishing to invest in such properties, a willingness to fund a pension alongside replacing their current stream of income and building an inheritance were all noted as key factors for potential investors.

"It’s interesting that the younger generation still sees [buy-to-let] as a way to plan financially for the future,” noted Donna McCreadie, a Buy-to-Let tax specialist at Perrys. “However, there are many things to consider before jumping in, including stamp duty charges, how income tax might be affected and what the return on the investment is likely to be.

"Investing in a property is a long-term plan rather than a quick fix to financial freedom so it’s important to gather as much information as possible and speak to a professional tax specialist and mortgage advisor before making a commitment," she says.



Which Property Type has Performed Best over the Last Decade?

 
Now that we are in 2020, looking back at the previous decade can help to shine a light on what we are to expect next in the property market. New research from Proportunity – a new equity loan startup firm – has shone a light on which properties have increased the most in value from 2010 to 2020.

Surprisingly, terraced properties have seen the greatest rate of growth nationally – with an average growth of 3.05%, compared to 2.9%, 2.35% and 2.33% for semi-detached, flats and detached properties respectively.

London has seen the highest rate of growth with the region’s averages outperforming most other parts of the country, with terraced properties in the capital of the country proving to be an outstanding investment decision. In the year 2000, the average price for a terraced property stood at £127,833 in London, however by the end of 2019 this had risen to £499,178 – a startling 290% increase.

“The 2010s were marked by the after-effects of the financial crisis, and then by Brexit uncertainty,” Vadim Toader, founder and chief executive officer of Proportunity, says:

“Despite these headwinds, we have largely seen growth across the board, but the clear winner is terraced housing – or more specifically, terraced homes in London – with buyers likely attracted to their historic characteristics and charm, as well as their limited supply, compared to new builds.”

If you are considering investing into a property this year, then there are three key aspects to keep in mind in order to be successful;

1) Plan for success; know exactly who your audience will be when you let the property out, or sell it on.

2) Gain a mortgage in principle; this will enable you to move quickly as investment properties will often have heightened levels of competition around them.

3) Work with a good estate agent; a reputable agent will be able to advise you on everything from the right area to invest in, to the potential yields you will be able to reap.
 
 

Region Name

 

flat CAGR

2010-2019

 

terr CAGR

2010-2019

 

semi CAGR

2010-2019

detached CAGR

2010-2019

East Midlands

0.74%

1.78%

2.11%

2.25%

East of England

2.62%

3.47%

3.59%

3.07%

London

4.93%

5.07%

4.33%

3.06%

North East

-0.50%

0.08%

0.47%

0.67%

North West

-0.04%

1.07%

1.43%

1.21%

South East

2.49%

3.40%

3.41%

2.84%

South West

1.34%

2.19%

2.35%

2.18%

Wales

0.50%

0.90%

1.01%

1.20%

West Midlands

0.65%

1.52%

1.96%

1.91%

Yorkshire and The Humber

-0.12%

0.91%

1.30%

1.32%

England and Wales

2.35%

3.05%

2.90%

2.33%