Amidst all the panic and chaos that has surrounded the economy in October due to the policies of the previous Prime minister and chancellors, our friends at the North Property Group celebrated a record-breaking month. Their property consultants managed to generate the highest number of sales in a single month in the company’s history. The total sales amounted to £9.9m worth of property sold, in October alone.
Potential investors may be worried that the property market is unstable at the moment, and if they were to invest, they would not get the desired capital gains they ordinarily would. But with these primary sales figures, we are showing you that it is not as bad as the public and media make it out to be and at the end of the day you should be thinking over 10 year periods.
The Pound is gaining strength
In November, we wrote about why the deteriorating strength of the Pound should not be a factor to worry about when investing in property, despite the value dropping to £1 = $1.04. The value of £1 is now hovering around $1.20, the same value it was at in the summer.
This is good news for both English and International investors, as the Pound is still lower than its average value, meaning that as the Pound continues to gain strength, the value of properties will increase as well.
Investors that chose to buy properties during the dip in the market will already be seeing capital gains in their investment as they will already be worth more than their purchased price. It’s not too late yet, as the Pound will slowly continue its rise to being stronger.
International clients may see this is as a prime buy-to-let opportunity as the Pound will compare as weaker than usual compared to most other currencies in the world, and the demand of the rental market remains as high as ever. This will bring in high rental yields as the demand for properties has stayed high, and rental prices have increased greatly in the past few months.
UK vs international mortgage rates
There has been a lot of scrutiny over the UK’s dropping mortgage rates, but it must be noted that the whole world has been affected by the recent economic climate. For example, mortgage rates in the USA went up to 7.16% for a 30-year fix in October, the highest the country has experienced in the last 15 years.
UK mortgage rates hit peaks of 6.65% for a two-year fix at the end of October, but it has since dropped to well below 5% across the board, as we predicted in November. Mortgage rates look more favourable for investors, and with our best in the market valued properties too, the opportunity is crystal clear as the market is not saturated.
The best time to buy is known to be when the general public or other potential investors are unsure. As potential buyers become unsure, more property prospects present themselves. When the market becomes more saturated, it becomes more difficult to firstly find available properties and secondly find a property that’s good value for your money.
Despite the rise in mortgage rates, prices of houses and the demand of the rental market are both very attractive factors if you are looking to invest in property now. As the mortgage rates stabilise, it is a sign that the market is doing the same. People will start to get more involved in the property market again, making it more difficult to get a property that will bring you the same value for money than it would currently.
Lack of supply vs demand
It has been highlighted several times that the UK housing supply is simply not enough to satisfy the demand of the growing population in the country.
Our properties that have been exclusively allocated to us at NPG are for sale at up to 20% below the original market price, as reluctance from investors grows amidst the uncertain economic climate.
Often, developers change the prices of their properties, as they re-evaluate them every half year. More often than not, this results in an increase, which is highly likely this year. We know this as a fact due to our good relationship with the developer for one of our marketed properties. The developer is set to increase the price by 5-10% in mid-December, meaning that any buyers between then and now will already have made profit.
This shows the awareness of developers to adapt to the market, as it is less saturated, there is a chance that properties increase in price as there is less competition and no need to match lower prices. This is in the hope that it creates more demand, as there are less options for buyers, and it shows the exclusivity of the units.
The small number of available UK properties highlights the opportunity that NPG presents to potential buyers. We have several properties available in high demand cities such as Manchester, Leeds and Brighton & Hove, all for some of the best value in the market. These properties also show high rental yields, bringing investors high capital growth in their investments.
Popularity in short-term lets
Short-term lets have increased immensely following the pandemic, as people and families alike look for more sustainable, convenient options as they will be able to cook their own meals.
From a landlord’s perspective, it has been found that short-term lets generate a higher income in the long run compared to regular ASTs (Assured shorthold tenancies) as well as other rental options, we went into more depth with this piece.
Our forecasts for some of the properties we market were ultimately very close to the eventual valuations, such as the figures for the Albion Place development in Manchester. For one-beds, we forecasted a nightly cost of £77 and two-beds at £102, with final average costs eventually sitting at £76 and £98, respectively. Despite this slight shortcoming, the forecasted occupancy rates of 80% were trumped by the actual rates of 89% and 85%.
The figures highlight the popularity of Airbnb’s and how they have become a viable option not just to families going on holiday, but also working individuals who may need a place to stay if they visit cities for conferences/events.
Short-term lets also take away the headache of dealing with tenants, especially if the tenant is not co-operative or fully adhering to their contract.
One of the worries that landlords may have is with regards to damage to their property. Airbnb in particular already has an impressive system where hosts leave reviews on guests, and hosts can decide whether guests who have no reviews or who have not uploaded their ID can stay, leaving you completely in charge of the process.
But this does not mean that you as the landlord will have to do much as we work with the biggest operator in the UK, who manage every logistical aspect and provide their own insurance. They also only take on projects in areas that will consistently have 80%+ occupancy, which they determine through industry-leading software. We market properties that will have that.
The currency regaining strength shows the market regaining strength and stability, though as it is not at its previous average rate, there is still an opportunity for investors to capitalise on this and buy properties before the start to grow in value.
Mortgage rates also may be something that is talked about a lot in the news, but the UK rates are dropping quicker than other countries, as the US’ rates remain high. The US rates also peaked at a higher amount than UK rates as aforementioned, showing the strength of the market here.
The lack of supply means it is almost a luxury to have a property in the UK as the population in the big cities particularly, increase. We also have the best value for money deals on the market for off-plan properties, with some 10-20% below market value. It is not a chance to miss out on.
In terms of tenanting these properties, ASTs are still a popular option but as explained, short-term lets are gaining in popularity and generate a higher income over the year in comparison to ASTs. The rental demand, whether it be long or short-term, stays high amidst the property market uncertainty.
Overall, the UK market may be causing the public to feel uneasy but when you ignore the headlines and begin to read into the factors, the prospect of UK property investment it is not as horrible as it seems.
Article supplied by North Property Group