Theresa May called the latest election because she wanted to get more Conservative MPs into the House of Commons. Instead, we found ourselves with no political party gaining the majority of seats, which is known as a hung parliament. So in order for the Conservatives to pass laws and budgets they needed to form an agreement with Northern Ireland’s Democratic Unionist Party which has 10 MP’s, making an overall majority. As a result, we've outlined the impact this has on the housing market and how landlords can help themselves in the current political climate.
What impact does this hung parliament have?
With no guarantee over Conservative promises, this could lead to uncertainity and caution. However, shortly after the election, a poll was run by the Institute of Directors (a non-party political organisation whose members are all business leaders). Although the survey revealed a drop in business confidence, 40% said they were optimistic about the year ahead. The three things that came out as being most important to the growth of our economy were: the European Union, a better-skilled workforce, and quality infrastructure.
How will this affect the housing market?
One of the great things about property investment is that despite drops in the economy, there's still usually money to be made. At the moment, both the economy and property market are slowing and inflation (2.7%) is rising faster than wages (2.3%). This situation is mainly down to the fall in the value of the pound versus other currencies increasing costs of goods to the UK.
The last time we had a slowing economy and costs going up by more than wages was during and immediately after the credit crunch. At that time, property prices fell because people were worried about making a big move while there was a lot of uncertainty, and rents either fell or flatlined because, with wages not keeping up with the cost of living, people simply didn’t have the money to pay any more.
But the situation we have now is nothing like the financial crash, it’s just that markets are slowing and people have a bit less money to spend than they did last year. That’s why we’re seeing more of a ‘slowing’ in property price growth and rents, rather than any huge falls.
Current performance of house prices and rents
Headline figures for England and Wales from our latest house price index, to the end of June 2017:
- Average house prices stand at £301,114, up 3.8% over the last 12 months
- Average Prices increased in the East of England (£324,754) and in Yorkshire & The Humber (£182,712)
Top three regional performers for annual growth:
- East of England +6.0%
- South West +5.4%
- West Midlands +4.9%
Top three individual authorities:
- Isle of Anglesey +14.1%
- Pembrokeshire +10.9%
- Buckinghamshire +10.4%
- Number of transactions up by 10% for the month
In the 3 months to the end of June:
- Biggest increase in transactions: North Wast, up by 1%
- Biggest decrease in transactions: London, down by 24%
- Average monthly rent now £827, up 0.3% on May
Top rent increases over the last year:
- Wales +7.2% (£599 pcm)
- East of England +3.6% (£872 pcm)
Advice for Landlords
If you’re a landlord who likes certainty, it’s worth considering rent guarantee insurance if you don’t already have it.
Also, check you’re on the best mortgage deal because if you can bring down your biggest monthly cost, that could balance out a general rise in your other expenditure. Your local Your Move branch can help you with both these things, so do contact them if you’d like any information or advice.
Don’t cut back on maintenance!
While you’re looking at where you might be able to make savings, it’s absolutely vital you don’t cut back on maintenance and repairs for your properties.
Now that local authorities have the power to fine you up to £30,000 - and particularly given the recent tragic fire at Grenfell Tower in London - it’s more important than ever to make sure your property is being legally let. Health and safety laws apply, whether you let a room, a whole property or have a large portfolio.
On a positive note, if you’re thinking of buying more investment property, a slowing market can be a great time to do it. Lower demand creates opportunities to get better deals and, as we all know, investors make their money mostly when they buy. So it’s well worth watching the market and looking out for the bargains that are bound to come up as the year goes on.
Overall, as long as the Conservatives can continue to govern and they do a good job to ‘steady’ the economy and move Brexit negotiations forward, we’re probably not looking at much of a change in the property market. As usual, most of the opportunities and issues with letting will be more localised, so keep in touch with your local Your Move agent - and keep an eye out for bargains as they come along!
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