This market isn’t often surprised, but I suspect there will have been a few eyebrows raised at the latest house price indices put out recently by both the Nationwide and the Halifax.
Halifax figures for 2019 as a whole showed a surprising 4% growth in house prices, compared to 2018, although it did acknowledge that a large part of that growth was in the latter months of the year/decade, and was in comparison with a period of relatively benign growth back at the tail-end of 2018.
That said, it had predicted a 2-4% increase, and therefore to have inflation running right at its highest prediction threshold was somewhat surprising. Might we see this as the start of a new period of house price growth? Only time will tell.
Nationwide looked at prices throughout the last couple of decades, and again might have surprised a number of commentators within the market with its conclusion that UK average house prices were up 33% over the past 10 years.
Again, this was nothing like the figures seen in the period 2000-2009, which saw growth of 117%, but it perhaps showed that capital growth with a property investment was possible, if those investors were prepared to hold their assets for the long-term.
That, in itself, is a message we should consider holding onto and highlighting, especially when there are many who might consider property investment without short, sharp increases in value, not worth their time or money. We might add that it is this type of investor – the get-rich-quick merchants – who got their fingers burnt at the tail-end of the 2000s, and that property investment should always be pursued with a long-term strategy.
What these figures do perhaps reveal however, is that we are likely to have a landlord population – certainly those who bought in the 2000s – who might well be sitting on a large amount of equity and be considering how they could use it going forward. That’s on the understanding that they haven’t used that equity to underpin any capital raising already, and one suspects that the more professional/portfolio end of the market, will have already been doing this regularly in the intervening years.
However, for some landlord clients there may not have been that entrepreneurial zeal present in others, and they may have been happy to sit on their properties for the duration, making the most of strong tenant demand, lower interest rates on their finance, and growing capital value. It doesn’t sound like too bad a place to be and is perhaps an argument for more potential landlords to look at the buy-to-let market as a place to invest in 2020 and beyond.
Again, we’re not suggesting that 2020-2029 will deliver the type of house price growth that was accumulated at the start of the century, but a healthy dose of inflation throughout the next 10 years would not be sniffed at. Especially, when it seems likely that the demand for quality rental properties will continue for some time, and we might have a future political environment which could be more benign for landlords. Fingers crossed.
Recent survey results suggest there are a number of existing landlords – most likely of the amateur persuasion – who after holding a property for some time, could now be persuaded to part with it. Despite what some believe, rental properties tend to be bought by landlords (not first-time buyers) and therefore new or existing landlords might be able to either start, or secure additions, to their portfolios in the months ahead.
The PRS and buy-to-let market is, of course, rather different to what it was in those heady mid-2000s’ days, but it is also very different to the pre-Credit Crunch situation too. The need for excellent rental stock has never gone away and demand continues to exceed supply, with little chance of this being squared up anytime soon.
Advisers have an excellent opportunity to pick up new investors/landlords, turning the next generation of portfolio landlords into long-term clients, and benefiting from a highly competitive mortgage market that services all types of landlords, with all types of properties, renting to all types of different tenants.
With good rental returns, a continued uptick in house prices, and the buy-to-let sector being as competitive as it has been for some time, we suspect that this next decade will continue to present opportunities for all stakeholders and signal a continued resurgence in this highly-important part of our overall market.
Jeff Knight is director of marketing at Foundation Home Loans