What will influence the buy-to-let market in 2018?

The start of a new year is always a good time for property investors to take stock and decide where their portfolio should go in 2018.

Living habits are changing, as are tenant preferences. These, along with increased government pressure for landlords to be much more professional, all combine to influence the UK’s buy-to-let sale over the next year.

Anyone thinking of investing in a property, or number of properties for the purposes of renting out, should be aware of the seismic changes in living habits and consumer preferences affecting where and how people want to live.

City centre living increasingly popular

People still want to live in city centre apartments, although tenants are increasingly demanding a different utilisation of space. They’re looking for more innovative ways to live, and are increasingly demanding that the quality of apartments is higher.

This essentially leads to tenants challenging the established norm of traditional one and two-bedroom apartments. The rental market for two-bed city centre apartments have historically been concerned with three different kinds of buyers:

  • Families and couples who need two separate bedrooms.
  • Older professionals who have more money and like to have two bedrooms.
  • People living together to save costs and because they can’t afford one bed accommodation.

The third category represents about 50% of people currently renting two-bed city centre dwellings. And it’s this group that is changing the most. Increasingly, they are moving away from two-bedroom apartments and looking for one-bed living spaces.

richard carr buy to let

While it has generally been the case that young professionals team up with friends to rent a shared house or apartment, today more of this specific demographic want their own space and are prepared to pay for it. In cities where demand continues to outweigh supply, there will be increased pressure on one-bedroom apartments.

City over suburb

Quality family housing has historically been in short supply in city centres, moving many larger groups out to the suburbs. However, as cities across the UK continue to invest in better leisure, commercial and entertainment facilities, more families are leaving commuting behind and embracing city living. This is upping the demand for three and four-bedroom town houses in city centre locations. We are seeing massive demand for competitively priced developments like this from a much broader range of buyers than before.

There has also been an upsurge in groups of wealthy young professionals and students who want to live communally, but in higher quality accommodation. For example, four young professionals happy to pay £750 per room can enjoy the high quality four bed town house that would rent to a family at £3,0000 per month.

These are the reasons that industry analysts are predicting that the UK’s top 20 cities will deliver price growth of 5% during 2018. This is compared with a prediction of 3% for the overall housing market.

New challenges for landlords

On the other side of the coin, away from the needs of the consumer, landlords are faced with new challenges. Accessing enough finance has become more difficult for man, following the government’s tax measures introduced in 2017. These are aimed at encouraging responsible, professional, incorporated landlords to buy into the rental market, and increase the quality of service for the UK rental market.

This has led to lots of private landlords incorporating their portfolios, so they can maximise the tax relief. However, the market has been slow to adapt, and many mortgages are available on far less favourable terms than before. Being able to access competitive mortgages is obviously key to the future of many UK investor landlords, and these changes have led to a bottle neck in completions across the whole country.

– Richard Carr

Richard Carr looks at what will influence the property market in 2018

richard carr 2018 marketIt could well be a better year for the UK’s property market as a whole, and particularly for tenants and first-time buyers. Various changes in government policy and an increase in construction projects look set to boost the fortunes of those looking to get started on the property ladder.

Here are the major factors that will influence the property market. It’s always worth keeping an eye on trends and economic changes, particularly for property investors. By staying one step ahead, investors can make sure that they are channelling funds in the most effective direction.

  1. Low interest rates

We’re expecting to see another 0.25 per cent rise in interest rates in Spring 2018, which will take the Bank of England base rate to 0.75 per cent. In real terms, this will add £22 to the average £175,000 tracker mortgage.

As more than half of all mortgage borrowers are on fixed rates, it’s unlikely that most homeowners will struggle with this rise. As the economy remains weak, the market isn’t expecting any further rises across the year. It’s likely that mortgages will stay cheaper, but as inflation is still hugely outpacing wage increases, they will still feel difficult for many.

  1. A rise in housebuilding

New home building has finally risen, with figures showing 217,000 new houses on the market in 2016-2017. This is up an impressive 20 per cent on the year before, but actually only brings the total back to levels before the crash. It’s also less than the 300,000 target set by the government.

If migration continues to fall as it has since Brexit, and we see more construction activity then it’s likely that housing supply won’t be such a big problem in the future.

  1. First-time buyers on the way up

As lending decreases for buy-to-let property, the outlook is brighter for first-time buyers who can expect to win out in 2018. Figures from 2015 show that landlords bought up 120,000 houses on buy-to-let financial deals, but according to the Council of Mortgage Lenders, this should fall to below 80,000 over 2018

Higher taxes and restricted lending criteria are slowly moving the focus away from property speculators over to homebuyers.

  1. Stamp-duty changes will help developers

When the Chancellor abolished stamp duty for properties worth up to £300,000 bough by first-time buyers, it saved 80% of first timers up to £5,000. However, the Office for Budget Responsibility says that it will raise house prices by 0.3 per cent, and we’ll see this increase in 2018.

The help-to-buy scheme has also been given £10 billion of investment, which will provide financing up until 2021.

  1. Fewer rent increases for tenants

There have been many years of rent increases, but it looks like that’s coming to a halt. Average rents in the UK increased by less than 1 per cent in 2017, and decreased in London.

As salaries remain under pressure from inflation, it looks unlikely that there will be many real rent increases this year. The proposed ban on letting fees in the spirit of levelling the rental playing field, and banning unpredictable and unfair costs, will also be good news for tenants. However, it’s unclear when this will come into effect. There has been no date fixed for the introduction of the ban, but the government has said it will be at some point in 2018. 

  1. London’s skyline reach new heights

For buyers looking for premium property in London, there are plenty of skyscraper developments underway. One Nine Elms is set to change the London skyline with its 56 storeys during 2018. The first buyers will move in to the luxury property in 2019, with prices starting at £800,000.

While it will be London’s highest residential building will be quickly topped by the Spire. Located in Docklands, it will have 67 storeys comprising 861 suites. They’re priced at around £2 million as a starting price and will be finished in 2020.

Workplace trends to look out for in 2018

Wellness is on everyone’s minds as we come up to the New Year, with resolutions at home and work being made. Promoting employees’ good health, well-being and mental health should always be at the top of company’s agendas.

For 2018, there are various well-being trends and initiatives that employers can implement in their office space to promote the health of their staff.

Encouraging staff to move more

Richard Carr 2018 Office designThe majority of employees spend hours every day sitting at their desks. With 8 to 10-hour days common in many sectors, and with the pressure of deadlines and projects always looming, some people barely move from a sitting position all day.

There is plenty of evidence to show that a sedentary lifestyle can be catastrophic for future health issues, and is bad for the body, brain and mind. Obesity, depression, anxiety and joint issues are just some of the common health problems associated with sitting too long at a desk.

A simple and effective way to counteract this is to purposefully reduce the amount of time employees sit at a desk. Introducing sit/stand desks is an ideal solution, as it allows staff to vary their working positions.

Encouraging breaks away from the desk and allowing staff to migrate to different working areas can also be an effective way to deal with the problems of sedentary working. Furnishing employees with tablets and laptops increases their potential for mobility in and out of the office.

Allowing workplace naps

This seems unlikely to many people, as napping on the job is generally frowned upon. However, studies show that a 20-minute power nap can be hugely effective in increasing productivity and reducing stress levels.

Forward thinking offices are incorporating sleep pods, rest rooms and policies allowing naps into their workspace design. As with many initiatives, tech giants like Uber and Google are leading the way in these kinds of pioneering ideas to help employees work to their potential, and enjoy their jobs as much as possible.

Encouraging digital boundaries

The work culture today is one in which employees are constantly connected. It can feel difficult, if not impossible, to switch off smartphones and stop scanning emails at the weekend. Having blurred boundaries between work and personal time is counterproductive in many cases, and leaves employees burned out.

Designing office space with breakout areas free from computers gives employees the option to take digital breaks throughout the day. The design and layout of the office space can’t be underestimated in terms of encouraging better health and wellbeing for employees. Smart use of space and the creation of private, quiet areas in an open plan office can have huge benefits for productivity and workplace happiness.

Incorporate plants into office design

The health and wellbeing benefits of including greenery in the office are mounting all the time. Studies show that plants improve not only the physical health of employees, but also cognitive and psychological elements.

Research from Biophilic Design: The Theory, Science and Practice of Bringing Buildings to Life (Kellert, Heewagen and Mador, 2003) shows clearly that people who are surrounded by plants in the office space are more likely to experience the following:

  • Increased focus and ability to concentrate
  • Psychological and physiological stress reduction
  • More positively enhanced moods
  • Improved cognitive performance
  • Reduced perception of pain if in a healthcare setting
  • Reduction in mental fatigue

Providing healthy food options

Many offices have vending machines or snack options for employees needing to quickly refuel during busy work times. However, the food on offer is often processed, full of sugar and bad fats. All of which provides only a short term burst of energy and can be detrimental to overall health and wellbeing.

Employers can now work with innovative businesses all around the UK who are working on creating healthy options in vending machines. Incorporating something as simple as healthy, preservative-free snacks for employees will improve mood, concentration and endurance.

– Richard Carr

Predicted rise for UK house prices in 2018

Property experts Rightmove has predicted house prices will rise across England and Wales by 1% next year. However, they also point towards a decline of a further 2% in London in 2018.

Annual price report

Richard Carr house price increase 2018The website’s annual market report says that the price falls in London will be more than offset by the increased value of small and medium tier homes around the country. Rightmove says they list a huge 90% of properties sold by estate agents across the country, and use this data to analyse trends.

Average asking prices for a home in England or Wales currently stands at £302,865. This is 2.6% lower than November 2017, but an encouraging 1.2% higher than December 2016. An average increase of 1% would be the lowest annual increase since 2011’s rise of 0.8%.

First-time buyers

Rightmove analysts expect that the kinds of properties that will increase the most (3%) next year are those typically bought by first-time buyers. These are generally two beds or fewer starter homes.

Second tier homes (three or four bedrooms, not detached) are set to increase by 2% over the same time period.

Last year’s predictions

In December 2016, Rightmove said that national prices would rise by 2% in 2017. While they did increase (by 1.2%), they weren’t totally accurate. They also predicted that prices in inner London would fall by 5% – they actually fell by 4%.

This year’s predictions match another report from estate agent Savills, which also predicted in November that average prices would rise by 1% in 2018. They also said that the market in the UK has proved “stronger than expected”, as they had suggested it would stagnate.

Mixed pricing pressures

Analysts at Rightmove further estimate that next year will continue 2017’s trend of being a mixed bag of pricing pressures. The result will be further slowing of the pace in price rises.

Price rises peaked in 2015 when they leapt 7.4%. The next year growth more than halved to 3.4%.

Regional asking prices

The average asking price for first time buyers outside of central London is £190,310 (that’s 3.5% higher than 2016’s figure). North Eastern England had the highest price inflation this year, rising by 4.7% and was the only region where prices didn’t fall in November.

Camden is London’s most popular borough, with prices rising by more than 19%. The second biggest price rise in London is Newham by 9.8%. Just a mile away from Camden, Islington saw prices fall by 10%.

In November, Savills predicted that the north-west will experience the fastest price growth in the country over the next five years, at 18.1%. They also predicted increases of 17.6% in the north-east and 17% in Scotland.

– Richard Carr