July 2014 - Market Report
So with the first six months of 2014 at an end. Now is probably a good time to take stock of the current state of the Bristol property market. What properties are renting? Who is renting? How is the sales market? Have the new mortgage regulations had an adverse effect on the market?
- What is renting?
Everything, in a word. The current rental market is to use a technical term BONKERS. Properties are letting very quickly and at full asking rent. Accommodation Unlimited usually have 20-30 properties available to let. During 2014 the average has been 10, and on several occasions we have not had anything to let. Our competitors are saying the same thing. Currently there is a lack of rental stock to keep up with demand and so prices are rising. So why is there this lack of stock? I believe there are 3 main reasons for this.
1.Lack of churn in the market
Tenants aren’t moving as often as before. In the recession, tenants didn’t move because of insecurity. They were not convinced their jobs would still be there in six months, so committing to a more expensive property was a big risk. Now the problem is one of increasing rent. If you have a nice property with a good letting agent/landlord, why take the chance of moving somewhere else with a higher rent that could go even higher. Tenants are not trading up preferring to stay put.
2.Help to Buy affecting the buy to let market.
18 months ago First time buyers were as rare as hens teeth. There were plenty of bargains for buy to let investors in the traditional first time buyer market, but then George Osborne introduced The Help to buy scheme and slowly but surely the first time buyer returned to the market. Now there is a frenzy of first time buyers pushing up prices and making it increasingly difficult to find property that will give a decent return for investors. That is not to say that there isn’t value in the market. Go to our What’s Hot page on our website to see the properties we have found that offer value for the investor
Now that the market has got back over 2007 levels. The accidental and hobby landlords are looking to take their capital out. Some are being bought by investors but the majority are going back to owner occupiers especially in less traditional rental areas
- Who is renting?
Firstly let me say that the Daily Mail got it wrong. The predicted influx of Romanians and Bulgarians just hasn’t happened. That is not to say that there isn’t a lot of foreign tenants. Currently 50% of new tenants are foreign. The vast majority of those are Spanish, the second Spanish Armada (See Market Report September 2013) continues unabated, in addition we are seeing increasing numbers of French tenants as well, I always knew that French O-Level would come in handy!
The market for 1-2 bedroom apartments within a mile of the city centre and in the £575 -£850 price bracket is creating a lot of interest. Bristol’s booming economy means that there are a lot of young professionals moving to the city for work and this is what they are looking for. It is not unusual for properties in areas like St Andrews, Montpellier, Totterdown and Bedminster to get over 100 enquiries with us as agents capping viewings at 10 and probably all the viewings being positive. We are having to make judgment calls on prospective tenants all the time, and it is not something we like doing.
The rise of the Free School – The BS9 postcode has always had a certain cache. The roads are wider the house prices are more expensive and the Waitrose is officially the busiest in the UK, but….the choice of secondary school has historically been shocking. QEH, Bristol Grammar, Redland High and Redmaids have built their business model on the fact that the schools that serve BS9 are poor and well to do parents will pay above the going rate for a good education. However something is happening. In 2011 the Bristol Free School opened its doors and it is the school that BS9 has been waiting for.
We have seen a steady increase in enquiries for property in the Free School catchment and what was a trickle is on the verge of becoming a flood. The phrase “located in the Free School catchment area” guarantees a lot of interest and adds £100-200 on to the rent. For more information regarding the catchment area visit the Bristol Free School Catchment Map
- How is the sales market
As you are aware Accommodation Unlimited is not an estate agent……yet, so to give you a low down on the current state of the sales market, I have asked Mark Leese of Bristol Estate Agents Leese and Nagle to write a few words
The tail end of 2013 and first six months of 2014 has seen a welcome return to the buy to let market by the smaller buy to let investor. The improvement in economic outlook, an increase in property values, the emergence of attractive buy to let finance and a long term view that interest rates are not going to rise significantly have all persuaded buyers that their money is better off being tied up in bricks and mortar than sat in the bank depreciating in value. Generally this has been a welcome intervention in the market. Post 2008 there have been a lot of reluctant landlords who have kept and rented their first flat/house rather than sell it on. These owners seeing the rises in the market are now able to resale and move on up the ladder in their own lives. The incoming investors are replacing these landlords and adding fresh rental stock to the market.
The medium term future is probably one of more gradual increase in value. Prices have risen by circa 10% in the past year and whilst this could be argued that the market is correcting itself after several years of stagnation it is more likely now that increases will be more in line with inflation and wage increases in the future. Buyers therefore will need to view buying property to let out as a 10 year project and look to build up a sensibly funded portfolio to provide long term asset growth.
So there you have our favourite estate agents thoughts on the current state of the market but what is happening to mortgages. Steve Bolt of Vivid Financial Services and expert in all things mortgage related told me:
Since MMR or the Mortgage Market Review came into force at the end of April, there has been no end of scare stories about how this would affect the ability of people to obtain a new mortgage. Comments about cancelling Sky and gym subscriptions, changing the supermarket you shopped in have all been mentioned as actions clients should take to ensure they stood a better chance of being accepted by mortgage providers. As ever with the tabloid media this is all nonsense, designed to sell papers above the idea of providing factual information.
The key to obtaining the best mortgage possible, quickly and easily is to prepare. By that I mean be able to provide your last 3 months payslips, 3 months bank statements etc. or if your self-employed your last 2 years accounts and SA302’s too (ask your accountant and they can obtain these for you from the Revenue. Make a full an accurate list of your current credit commitments. Lenders will have access to your credit file and any missed loan or credit card will be noted and this can be held against you when an underwriter reviews your case. Know your address history, and make sure you’re registered on the Electoral Roll too…lenders like this as proof of where you live.
Be honest with your broker. Any adverse information should be noted. Mortgages for clients with a poor credit record are available and it will save time for the broker to know where he or she can place your mortgage.
Mortgage rates continue to be at an all-time low. Even today Woolwich reduced their fixed rate range. However this won’t last forever. A Bank Base rate rise WILL happen, whether it’s this year or early in 2015. My advice is to act now and fix your rate for as long as possible assuming you intend to remain in the property for the equivalent time. 5 year fixed rates are proving very popular and for added peace of mind 7 or 10 year fixed rates are also available
In conclusion the property market continues to drive the economic recovery, and the rental market is especially strong. There are potential dark clouds on the horizon, Labours proposals for the rental market will be a key battleground in the 2015 General Election, and interest rates will rise sooner rather than later, but on the whole there is a mood of confidence for the medium term, just don’t believe what you read in the Daily Mail or Gaurdian.