Whilst the residential property market begins to predictably slow a little back to pre-pandemic levels, there are signs that things are beginning to normalise again in the UK economy.
Put aside temporary economic issues such as import difficulties with the EU, gas prices and travel restrictions, and it seems we’re on our way back to something like pre-pandemic activity.
It should be said that doesn’t mean that we’re where we would have been had the pandemic never happened – we’ve spent billions on economic relief packages and business was shut for the best part of a year – but we’re back to where started.
In property, things have been slightly different in that the pandemic almost acted as rocket fuel applied to a steadily burning fire. Property prices were increasing somewhere along the 2-4% margin pre-pandemic, before Nationwide estimated that prices jumped an enormous 15% in the North West of England between 2020 and 2021.
Again, price increases appear to reflect something of a mad rush for housing thanks in part to the stamp duty holiday, and also thanks in part to a shift in attitudes towards housing.
What we’re saying here is that property hasn’t exactly followed any logical pathway during this pandemic. Now, residential housing appears to be reverting back to its pre-pandemic activity, but the private rental sector certainly doesn’t appear to be.
Rents rising
According to new data reported by Landlord Today, some areas of the country are now reporting double digit increases in rental prices, with South East and East England reporting increases of 13.9% and 10.9% respectively.
The same article went on to say, ‘The average rent of a new let rose 7.4 per cent or £75 in August compared to the same month in 2020 to stand at £1,085 pcm.’
What seems apparent here is that the demand for private rental property has not abetted at all, with demand continuing to far outstrip supply in the market.
There seems to be a set of unique conditions here in that many people are looking for new rental property at the same pace as they were at the height of the property boom this year. However, thanks to a number of factors in recent times, the economy house building has slowed significantly.
Added to that is the fact that more people than ever have been looking to get on to the housing market, with many of them first time buyers. This has meant that even the smaller amount of property that may have normally been acquired as buy-to-let hasn’t been, meaning a further lack of supply into the market.
As an investor, this creates conditions that are prime for anybody looking to expand their investment or their exposure to the market. There is still a huge amount of value and stock to be acquired in the wider market, but with quickly increasing rents and values begin to slow, property yields are shooting up quickly.
Many areas are now seeing average yields creep over double digits, and so there is a huge opportunity for new and existing landlords to further make the most of the current boom.
