The UK housing market – what do you need to know? 

Whether you own a property, rent one or are simply striving to get on the housing ladder, it’s an ever changing market. We’ve scanned the property market and gathered the things you need to know in the below blog.

Are UK property prices still increasing?

It seems that for the last couple of years, property prices have been going through the roof. But how long can this continue for? Well, it seems this trend is set to continue for the time being. In January the average price of a property coming onto the market was up by £2,000 compared with December. Interestingly, sales however were down by 5.5% from the same period a year ago.

So what is the average price of a property in the UK? Currently, its tracking at £297,587, is that higher or lower than you were expecting? Even though prices are increasing, it’s not putting people off viewing what’s out there to purchase. Rightmove who track 90% of the UK property market have more than 4 million visits to site a day, which is a tenth more than this time last year. However, how many of us look at Rightmove, ‘just because’. One of my favourite past times is to put no limit in the price field and see what’s about….keep dreaming!

It’s worth noting that whilst prices are increasing, its taking on average 12 days longer to sell a property compared with this time last year. So is this a sign that actually house prices are going to stop increasing and give us all a chance to catch up?

In London where house prices are simply astronomical, the average property price is £600,926 down 1.4% on the month and 3.4% over the year. This isn’t much consolation if you are a first time buyer, but this shows hope that they might actually stop increasing in value.

Traditionally this time of year starts to pick up dramatically in terms of people looking to move house, however experts are saying that the pace is rather slow at the moment. So what does this actually mean? With affordability stretched and income falling behind inflation, experts are predicting that house prices in 2018 will remain flat. Halifax are supporting this advising that in December of the properties they dealt with, house prices fell by 0.6%, that’s the first decline registered in six months.

Where are the top 10 property price hotspots in the UK?

Over the years as prices in London have continued to increase, people have looked to other areas close by to buy houses. One of the most popular locations being Cambridge. When you say Cambridge, most of us will think of the university, but actually it’s a great commuting distance from London. Over the last year this city has seen a pace of growth three times higher than the national average! This is largely due to the £7 billion investment in new roads, rail links and homes. Compared with the borough of Kensington and Chelsea where house prices fell by 10.7% equating to £1.2 million on average. But let’s not feel too sorry for the borough, as it still has the highest average house price in the UK.

So where else in the UK are house prices booming? Eden in Cumbria has experienced double digit growth with an average house now costing £206,000. And have you heard of a place called Kettering? Well, there’s a trend emerging. Kettering is one hour outside of London via a direct train and saw a 14% increase in house prices from 2016 to 2017.

Interestingly the Orkney Islands, off Scotland’s north-east coast has seen an increase of 18.2% in house prices. So, are people moving away from the hustle and bustle of city life and opting for a quieter life? Well when you can buy a nice two bedroom house with potentially a sea or farmland view for £147,000 why wouldn’t you?!

Is it still profitable to enter into the rental market?

There have been a lot of changes to the rental market in the last couple of years, which has meant some landlords have had to sell their properties. If you’re not aware of the timeline, the major changes have been:

April 2016

A 3% stamp duty surcharge was introduced on all buy-to-let-properties.

January 2017

The Bank Of England imposes stress testing on buy-to-let mortgages meaning, rent must now typically cover mortgage payments at 145% at a mortgage rate of 5.5%.

April 2017

A phased reduction of tax relief is imposed on buy-to-let mortgages.

October 2017

The Bank of England imposes portfolio rules for landlords with four or more properties, meaning lenders must review a landlord’s full portfolio of properties when each new mortgage is assessed.

So with the above in mind, landlords are starting to rent their properties to multiple tenants instead of just one. Research has shown that by following this approach, landlords can earn up to 8.9% a year more than the traditional renting methods.

Having said this research has shown that the average value of a traditional buy-to-let property in 2017 was £305,238 a 19% decrease on the average in 2016 when it was £375,409.

So how are landlords still making money? Research suggests that landlords are buying lower value properties and looking further north to purchase these. The further north you go, on the whole, stamp duty is less, property is cheaper and there is more demand for houses in the rental market. It appears Nottingham and Liverpool are the best places to be landlords, so make sure if you’re looking, you adapt your Rightmove search.

Should you invest in a HMO?

First things first, if you don’t already know what HMO stands for, quite simply its house in multiple occupation and in layman’s terms is a property that is shared by three or more tenants who aren’t members of the same family. These landlords must have a license from the council to ensure that the property is managed properly and meets certain safety standards. 

HMO’s have become a really popular way for landlords to make more money from the rental market. However as more people take this approach to the rental market, property prices have increased significantly more than the amount of rent you can charge. As a result councils are being tougher on whom they allow to have a HMO licence.

One of the most obvious advantages to landlords is the fact that if one tenant moves out, they will still be receiving income from the other tenants and it will therefore not affect their mortgage repayments. Another advantage is that normally landlords will be able to charge more net rent by having multiple tenants, opposed to just having the one.

As with anything, there are disadvantages for having HMO’s, most notably the more tenants the larger the risk of the property getting damaged. HOM’s are more complicated to look after than traditional buy-to-let properties, with stricter licencing rules. It’s worth noting that these can vary depending on local authority, you will need to complete documents frequently and this will involve extra cost. It can also be a lot more difficult to get a mortgage as lenders are a lot stricter around HMO’s. Typically, mainstream mortgage lenders tend to avoid this type of borrower, but there are smaller specialist brokers than you can go to.

How is the first time buyer market looking?

We all know it’s becoming increasingly harder for first time buyers to get on the property ladder and the government are taking steps to try and relieve this pressure. In the autumn budget 2017 stamp duty was abolished for first time buyers, but what effect has this had on the housing market? Unfortunately due to this tax being abolished, purchasing demand increased, but the number of properties available to buy did not. Two bedroom or smaller houses that typically attract first time buyers rose in value by over £2,098 between December and January to £188,024. This was predicted when the autumn budget was announced in November.

So, if you’re a first time buyer, keep saving you will get there!

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