The property market in the UK recently has been, quite clearly, absolutely on fire recently. House prices, rents and demand have all absolutely soaring following the worst of the pandemic.
For a variety of reasons, the market has seen demand at levels we haven’t been seeing for decades. Explanations vary from a surge of pent-up demand, to a sustained shift in attitudes and mindsets when it comes to housing.
Regardless, landlords and homeowners are seeing one of the most pronounced and sustained rises in house prices in decades. In truth, it’s unlikely that prices will continue to grow by quite this much in the long term.
According to Nationwide, properties in the north west of England alone rose by 15% year-on-year from 2020 to 2021. Although this has held up across the year, the expectation widely held is that this won’t continue at these sorts of levels into next year and will more likely correct back to normal levels of between 5% and 8%.
That being said, house prices and demand for rental property are two different beasts, and whilst house prices are likely to recede back to normal levels, demand for housing seems to be on a continuous upward curve.
Highest for 5 years
That appears to be reflected in the latest figures released by property website Zoopla.
In an article for the BBC, it was said that ‘Zoopla said private rental prices across the UK increased by 5% in the 12 months to the end of July – adding £456 a year to the average tenant’s bill.
The 5% jump is the biggest recorded since Zoopla’s index started in 2008.
The firm said it was down to increased demand for city living amid limited supply.
As lockdown restrictions have eased and businesses have reopened in city centres, there has been a marked return to more built-up areas, it said.’
This marks a quite incredible uptick in demand. Of course, that’s not to say that demand hasn’t been high anyway, but this provides further evidence that demand will continue to far outstrip supply for some time.
Landlords
For landlords and investors, this marks good news. Ultimately, we can point to the basic economic principle that when demand outstrips supply, there is upward pressure on prices.
In many ways, for professional landlords and investors the price increases are immaterial if the rental growth isn’t keeping up to be able to provide good yields and a good rental income.
So, whilst, yes, price increases are good and required, in many ways the rental increase is the primary measure that we should be assessing property investments, and with this data in mind things look very good indeed.
Now, it would seem, would be a good time for clients and investors to consider expanding their portfolio in order to make the most of these rental increase trends, as strong rental income also provides the ability to use existing property to raise equity to expand a portfolio.
