This week we have had our first Hometrack report of 2021 released and it seems that the property market is showing no signs of slowing down with Lockdown 3.0 adding more fuel to the fire. The data shows that annual UK house price inflation grew +4.3% with Wales and the North West having the highest increase at +5.4%. Liverpool has jumped to the top of the city rankings coming in at +6.3% over the last 12 months and Manchester was close behind with +6.0%.
The North of England really is flying at the moment and the growth rate hit a 10 year high in northern English regions. The growth is running at the highest rate since before the global financial crash.
It looks like the latest lockdown is causing even more of a supply issue which is increasing the imbalance between supply and demand. Demand for homes is up 13% on this time last year, with new sales agreed also up 8%, however, the flow of new supply onto the market is down 12% on last year. London is the only region to register more supply.
With the supply down and demand up, this year seems to look as if it will carry on where we left off in 2020.
Now, let’s take a look at the headlines that caught our attention this week, I always try to summarise the links to save you having to click through.
- Government changes model tenancy agreement to help renters with pets – It is official, the government have now updated their standard tenancy agreement template to enable renters to keep pets as default. Under this new Model Tenancy Agreement (which is the recommended contract), landlords are no longer able to issue blanket bans on pets. Landlords will have to object in writing within 28 days of a written pet request from a tenant and provide a good reason as to why owning a pet could be impractical eg smaller property, flats etc. To ensure landlords are protected, tenants will continue to have a legal duty to repair or cover the cost of any damage to the property. Of course, to what extent this contract will actually be implemented is unknown as it is of course only ‘recommended’ and not requisite.
- A third of agents saw rents increase in December – ARLA Propertymark’s Private Rented Sector (PRS) Report has revealed that circa 30% of tenants experienced rent increases in December. Similar to the sales market, demand was up and supply was down in December in comparison to the previous year. It is the first time that this figure has risen in four months. With a supply and demand imbalance, it is imperative that property market conditions are not worsened for investors because if more landlords leave the market and fewer investors are buying then that puts a strain on supply even more which won’t be good as a lot more PRS homes are needed.
- Half of conveyancers want SDLT scrapped – It looks like the majority of conveyancers aren’t fans of the stamp duty land tax and want it scrapped on property purchases under £500,000 if the government ends the SDLT holiday on 31st March. A poll carried out by Index West Midlands revealed that 51% feel this way and around a quarter of conveyancers believe a gradual reintroduction of stamp duty is preferable to an overnight return to the stamp duty charges if the government sticks to its plan to end the holiday on the 31st March. If you read these weekly newsletters frequently then you will know a call for an extension has been happening for a long time because some people in the industry feel sales will slow down or even come to a standstill completely. While I am all for a review and change to the archaic tax that is stamp duty, I don’t feel not having an extension or immediate change to stamp duty will cause the market to crumble. However, I do think an extension and/or a change (for good) would only benefit the property market as a whole going forward. But, if you were the government trying to recoup the deficit they find themselves in trying to keep the economy afloat, would you want to get rid of the tax that brings them in £11.6 billion a year?
- Five most common problems of why UK property purchases fall through – I chose this article this week as it is informative and a great one to read if you aren’t too familiar with the buying process. With the English property buying process, until you exchange contracts there are multiple reasons why a property can fall through i.e the sale or purchase does not happen. This can mean people lose money and it can be very stressful. According to property platform WiggyWam, a quarter of house sales fall through every year in the UK – an estimated 225,000. This costs UK home-buyers £607m every year. This article highlights the top 5 reasons why that might happen which are: difficulties with the mortgage, delays in the legal process, home survey discovers problems with the property, gazumping (seller takes a higher offer from someone else) and if a property sale is part of a chain. So what is the point of highlighting this? Well if you get to know what the most common issues are then you can plan ahead, get your self in a position where these are unlikely to happen or reduced and therefore help mitigate the risk of a fall through as much as possible. As we always point out at Track Capital, with any property investment (or investment in general) there is risk and it is best to reduce that risk as much as possible. One risk with property is a fall through. Luckily, with most of the property investments we market to investors, these top 5 fall through issues are minimised. Gazumping can’t really happen as the properties are off-plan and you pay a reservation fee to secure the property. The home survey discovering problems is massively unlikely to happen as they are new builds. The property sale being part of a chain won’t happen as the property is new so will be empty. Delays in the legal process are minimal as they are new so pretty straightforward. The only one that is likely would be difficulties with the mortgage and this is something you can help reduce beforehand by seeking good advice prior to purchasing.
That is all we have for you this week. If you have any comments or questions on this week’s news summary then please feel free to send us an email at [email protected] – if not, see you next week.