Market Intelligence

The Telegraph talks to landlords rushing to sell their properties to avoid being hit with massive tax bills after the Budget. Landlords have been hit by a string of obstacles: reduced mortgage interest rate relief, rising interest rates, higher stamp duty and a slew of costly regulations. Now they fear a hike in capital gains tax with the Chancellor widely expected to equalise it with income tax, meaning higher rate taxpayers will have to hand the Treasury 40% of their gains instead of 20%. Investors across the country are selling up – Rightmove found that 18% of homes on the market were previously available for rent, a record high. According to Hamptons, landlords purchased 10% of homes sold across Britain during the first half of this year, the lowest share since 2010. Landlord Craig Storey says: “It’s hard to understand a lot of what Labour are doing at the moment. I just find it a little galling that we have worked to achieve something and at a stroke of a pen they can take it away from you. That’s upsetting.”
The Sunday Telegraph

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(Bloomberg) — UK banks are preparing for a red-hot corner in the lending market as the new Labour government’s plan to address a housing shortage prompts developers to boost supply of homes.

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The Financial Conduct Authority (FCA) has fined PricewaterhouseCoopers LLP (PwC) £15m for failing to report to the regulator its belief that London Capital & Finance plc (LCF) might be involved in fraudulent activity. This is the first time the FCA has fined an audit firm. The FCA says this notice is the final outcome in connection to failures relating to LCF.

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Mortgage lending is set to slump next year, as the number of arrears and repossessions increases, according to a trade association representing the UK banking and finance industry.

The outlook for 2024 is one of continuing challenges in the mortgage market, but the main pressures on affordability look to be peaking now, UK Finance said.economy slowing. “This is an important insurance policy against a recession,” Goldman Sachs Research Chief Economist Jan Hatzius writes in the team’s report titled Macro Outlook 2024: The Hard Part Is Over.

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Goldman Sachs Research expects the global economy to outperform expectations in 2024 — just as it did in 2023.

That outlook is based on our economists’ prediction for strong income growth (amid cooling inflation and a robust job market), their expectation that rate hikes have already delivered their biggest hits to GDP growth, and their view that manufacturing will recover. Central banks, meanwhile, will have room to reduce interest rates if they’re concerned about the economy slowing. “This is an important insurance policy against a recession,” Goldman Sachs Research Chief Economist Jan Hatzius writes in the team’s report titled Macro Outlook 2024: The Hard Part Is Over.

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Britain’s housing market is past “peak pain” and prices look likely to bottom out by next summer, according to the estate agency Savills.

The average UK house price is projected to fall by 3% in 2024, after a 4% drop this year, the upmarket estate agent and property advisory firm said in its five-year outlook.

Prices held up slightly better than expected in 2023, according to Savills, as mortgage markets settled over the spring and autumn months, after the chaos unleashed by Liz Truss’s mini-budget just over a year ago. Property values are estimated to be down a total of 7% since the autumn of last year to the end of 2023.

Savills expects the Bank of England to start cutting interest rates in the second half of 2024, reducing its base rate to 4.75% by the end of that year, from 5.25% now. The property company forecasts rates will fall to 1.75% in 2027.

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House prices had the biggest monthly rise in October for more than a year, according to the Nationwide.

However, they were still down sharply on a year ago, the UK’s biggest building society said.

The 0.9% rise in prices was most likely due to there not being enough properties to meet demand, it said.

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House prices have fallen in all UK nations and the nine English regions, on an annual basis.

They’re falling fastest in the South East of England, and slowest in Northern Ireland.
In a knife-edge decision as the economy comes under growing pressure, the Bank’s monetary policy committee (MPC) voted by a narrow majority to hold its key interest rate at 5.25% – already the highest level since the 2008 financial crisis.

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Relief for mortgage holders after 14 consecutive rises as UK economy comes under growing pressure.

Mortgage holders have been offered relief after the Bank of England kept interest rates on hold for the first time in almost two years, raising the prospect that a peak in borrowing costs has been reached in the battle against inflation.

In a knife-edge decision as the economy comes under growing pressure, the Bank’s monetary policy committee (MPC) voted by a narrow majority to hold its key interest rate at 5.25% – already the highest level since the 2008 financial crisis.

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Interest rates need to rise further to crush inflation, a top Bank of England policymaker has warned, in a blow to mortgage borrowers’ hopes that higher borrowing costs may soon ease.

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Bridging completions, applications and loan books continued to grow in Q1 2023, according to the latest data from the Association of Short Term Lenders (ASTL).
The figures, compiled by auditors from data provided by members of the ASTL, show that bridging loan completions passed £1.4 billion in the first quarter of 2023, which represents an increase of 11.8% on the December 2022 quarter.

Applications continued to rise, reaching £9.8bn during the quarter. This represents an increase of 13.1% compared to the quarter ended December 2022.

The latest data from the ASTL shows that the value of loan books has also increased, rising by 4.0% to another new high of just over £6.8 billion.

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Brokers anticipate more pain for borrowers as increased demand leads to deals being pulled and fresh rate rises

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House prices in the capital remain the most expensive of any region in the UK, with the annual increase of 3.2 per cent in January taking the cost of a home to £534,000 on average.

Markets are pricing in a 0.25% rise in UK interest rates – taking the level from its 15-year-high of 4% to 4.25% – following remarks by US Fed chair Jerome Powell that the US central bank will need to tighten policy harder to bring inflation under control. Expectations of another Bank of England rate rise come after Monetary Policy Committee member Catherine Mann said rates could need to go higher, warning that the relative weakness of the pound could cause more inflationary problems. But Swati Dhingra, another MPC member, warned against overtightening when there are growing signs external price pressures are easing. BoE governor Andrew Bailey will make an announcement on rates on the 23rd of March.

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Leading mortgage lenders are increasing the cost of home loans, with data from financial information service Moneyfacts showing that the average two-year fixed rate is now close to 6%. A typical two-year fixed mortgage deal is currently 5.75%, up from 4.74% on the day of the mini-Budget. In December, the average two-year fixed deal was 2.34%. Rates have risen as interest rates have increased and the recent slump in the pound has driven fears of steeper interest rates, prompting lenders to reprice deals. In recent days, major lenders such as NatWest, Nationwide and Virgin Money have increased their rates. Lenders have also withdrawn hundreds of products in the last week. Moneyfacts said that there were 3,961 deals available on the morning of the mini-Budget, compared with 2,262 at the start of this week – a 43% fall.
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Mortgage borrowing rules have been eased after the Bank of England scrapped an affordability test which forced lenders to calculate whether potential borrowers would be able to cope if interest rates climbed by up to 3%. While removing the stress test may help some potential borrowers – such as the self-employed or freelance workers – get loans, other rules such as strict loan-to-income limits will not make it easier for most people to get a mortgage. The shift comes after a 2021 review of the rules saw the Bank of England’s Financial Policy Committee declare that the loan-to-income (LTI) flow limit “is likely to play a stronger role than the affordability test in guarding against an increase in aggregate household indebtedness and the number of highly indebted households in a scenario of rapidly rising house prices.” The Financial Conduct Authority’s responsible lending rules still require lenders to make a broad assessment of affordability before approving a loan. Mark Yallop, chairman of the Financial Markets Standards Board, said although the change would make it “slightly easier” for some borrowers to get a mortgage, he did not think with would have a significant impact as “the biggest constraint on new mortgages is the ability of borrowers to afford a deposit.”
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Harvey Jones in the Daily Express explains how rising savings rates could mean some people could soon be receiving surprise tax bills. A basic-rate taxpayer who gets interest of 1.5% a year needs more than £67,000 in savings before breaching the personal savings allowance (PSA) and paying tax. Higher-rate taxpayers would need £33,500 earning 1.5% before they pay tax on interest. Aldermore Bank now pays 3% a year on its two-year fixed-rate bond, on sums between £1,000 and £1m. At that rate of interest, a basic-rate taxpayer would breach the PSA with just £33,300 in savings, falling to £16,650 for a higher-rate taxpayer, said Laura Suter, head of personal finance at investment platform AJ Bell: “A growing number may find themselves hit by a shock tax bill as a result.”
Daily Express

Data from UK Finance shows that 2021 was the strongest year for mortgage lending in 14 years, with £316bn of home loans issued. This was the highest annual total since the £357bn recorded in 2007. James Tatch, head of data and research at UK Finance, said: “We’re seeing a return to a stable path for new lending” for 2022 onwards, adding that more remortgaging activity is expected to take place in 2022 and that this could accelerate further in 2023. Noting that a number of five-year fixed-rate mortgage deals will end in two years’ time, he said this “will provide a boost to remortgage numbers.”
The Guardian

A study from the property group JLL indicates that increased demand to live to the capital after the height of the pandemic, combined with the return of the overseas buyer, will boost the London housing market over the next five years. JLL predicts prices in London will rise 24.5% by 2026, out-acing national house price growth of 20% over the same period. “There is a bounce back in urban demand in London as people once again reset priorities around where they live and opt to stay and move within the city, rather than leaving,” says Nick Whitten, head of residential research for JLL. “In particular we are seeing people buy in those neighbourhoods which have a village feel as they balance convenience and transport with space and greenery,” he explains.
Evening Standard

Since the start of the pandemic, recent figures have shown that more than 11,000 second-home owners in England have opened their properties to become holiday lets.
Second-home owners have utilised their properties to take advantage of the staycation demand and to secure additional income during the pandemic.
Here, Emily Turner, sales and marketing director at Perfect Stays, helpfully offers her four top tips on how you can maximise your investment going into the off-season.

Intelligent pricing strategy
Having a detailed understanding of your customers’ booking habits is vital if you want to maximise rental rates. Your pricing needs to be tailored for each week throughout the year to suit visitor demand in your local area. Prices also need to remain competitive to your local market while adjusting to suit seasonal trends.
To start, look at visitor data for your region and when numbers peak. Depending on your location, this may correlate with national bank holidays, school holidays or popular local events. Once you’ve built up a picture of visitor behaviour and the local market, you’ll be in a position to create a pricing structure that maximises rental rates.

Unique features
Investing in unique features that will make your property stand out will help to maximise revenue. Features such as a hot tub, wood burners and games rooms help your property book well in the colder off-season months and can help raise rental rates.
Winter can traditionally be a quieter time for holiday homes but by creating a cosy feel you can increase the appeal of your property during this period, attract more visitors and boost your annual revenue.
The key is making your home a comfy and enticing retreat for the whole family to spend time together so offering guests activities or key features that keep them occupied indoors if the weather takes the turn for the worse, will entice potential holiday-goers to book with you.
Although items like hot tubs are not an insignificant initial investment, the increased number of bookings and associated rental rates you’ll achieve will have a significant benefit in the longer term, offering you a good return on investment and ensuring your property stands out to visitors all year round.

Location
Location is an important factor for guests when considering which holiday home to book and what they want to get out of their stay. Accommodation is only one part of the experience so share details on what guests can enjoy doing in the local area and highlight unique amenities like sea views, beaches, great restaurant and historical sights etc. Offering guests more than just the accommodation will entice them to pay more and stay longer.

Pet-friendly
Making your holiday home dog-friendly is a sure way to boost bookings from the pandemic puppy boom. According to the latest Google data, searches for ‘dog friendly holidays’ have seen a 179% increase in the UK since the start of the pandemic.
Cater to the demand by ensuring your property is pet safe. If possible, make sure your garden is fully enclosed and designate a suitable place the dog can sleep unsupervised overnight, such as a utility room.
With a very high percentage of UK holiday makers wanting to get away with their dog, accepting pets will expand your property’s appeal to a wider market and enable you to increase booking levels all year round. Although many owners worry about the potential damage dogs may cause to a property, issues are extremely rare and charging a small fee for each dog will cover any additional cleaning required.
Source: www.propertyinvestortoday.co.uk