Given that the BBC has now given up on obtaining its weather forecasting information from the Met Office after 93 years – we had the idea that we should come up with 10 property forecasts for Harrogate Landlords over the next 10 years.
Surely our property predictions cannot be any worse than the Met Office predictions for the weather?
Firstly the one thing we can all predict with complete certainty is that we are guaranteed interesting and challenging times ahead :
1. Lower National Capital Growth
Capital growth will be subdued across the U.K as our economy steadily stabilises post Brexit but here in the Harrogate bubble we will defy the national trend and record good growth year on year. There will be fewer “boom and bust” swings in the overall UK economy.
Shrewd local property investors will still make money on property through refurbishment/improvements and developments (extensions etc).
2. Low Interest Rates
Interest rates will continue to remain low and reflect the challenging economic conditions across the UK & Europe. There may be other bank bailouts and people may choose to store their savings in property, which will help support selling prices and rents (yields).
3. The Section 24 Bombshell
Section 24 of the 2015 Finance Act is like an unexploded bomb set to go off on the 6th of April 2017.
In brief from this date rental profits must be computed without including interest payments on loans/mortgages.
Will the explosion kill the PRS (Private Rental Sector) in the UK? – I don’t think so but it will definitely cause some damage.
The scale of the explosion can be judged by reference to the situation of a Professional Investor i.e. the tragic case of “Ray the Landlord”.
Ahead of these severe shock waves there will be some landlords who will sell up because BTL (Buy to Let) is no longer as attractive/profitable as in the past.
Highly leveraged landlords with large Property portfolios will face considerable tax bills and those that have not planned their cash flows/incomes & expenditures well ahead will be vulnerable.
“Cause and Effect” means that we’ll see some landlords selling up at bargain prices. The demand/supply imbalance may get worse and as properties available to rent decline so will rents rise.
We will also see even more cash purchases here in Harrogate, a continuation and escalation of the current situation where cash purchases and low LTV’s (Loan to Value) ratios on residential property are commonplace.
Some small Lettings Agencies may struggle as some landlords exit the marketplace. We can expect to see a consolidation of some of the big names in the national Lettings sector as smaller Agents drop out due to an overall reduction in the number of Landlords.
4. Article 50
There will be an “Article 50” effect which essentially dissolves our marriage to the EU. We can expect sellers, buyers, landlords & investors to be cautious ahead of this landmark event. There’s likely to be a rush to buy before it is triggered and there may well be a rush to sell, or put off buying, when it is announced.
This may cause more people to rent rather than buy whilst they sit tight and wait to see what the fall out of the divorce is likely to be.
5. The Property Market will become even more fragmented
Large cities & towns where there are job opportunities will be the driving force of the UK’s property market.
The North/South divide will continue to widen, Harrogate will continue to grow exponentially and become more prosperous as the Government directives of 3,000 new homes in and around the town over five years is reached.
More people will look outside London for affordable accommodation, which will benefit the property market within the M25 catchment and in those locations with good commuter links to the capital.
6. Institutional Investors
Large institutional investors will fund most housing schemes, very often apartments, and we’ll see the rise in apartment living and less family homes being constructed.
This in turn will put a big premium on family homes in good school catchment areas both for sale and rental, again a continuation and escalation of the current situation here in Harrogate.
7. Landlords Will Look Beyond BTL (Buy To Let)
Landlords will look at investments that are not overshadowed by Section 24 tax changes, such as holiday lets, semi-commercial lets, permitted development and buying property in a limited company.
The number of small “Mom and Pop” amateur landlords will decline, and new landlords will tend be those people with significant other income who will use property investment as a pension or hedge against other investments.
BTL borrowing criteria will become extremely strict. We are even now seeing much higher stress tests on borrowing leading to lower LTV’s (Loan to Value). We can expect to see BTL lending brought more into line with residential lending, with stricter underwriting processes and lender accountability.
8. Expect the Unexpected
Despite the best research and expert forecasting, there will be a big surprise almost every year. It’s just impossible to anticipate every event which can blow away all our carefully laid property plans.
Unforeseen events can of course be both negative or positive and there will be opportunities for Landlords in either scenario.
9. Rise of Multi-Generational Households
More people/families will be renting rooms as opposed to entire dwellings. We will find people of all ages renting rooms and not just young professionals.
We will see children remaining at home for longer and may even see three generations residing in one property. There will be an increase in demand for properties with self-contained accommodation, like an annex, or flat, to meet this demand.
10. Biased commentary
Stand by for some bad news in the property programmes on TV in the wake of the Section 24 deadline in 2017. We can expect to see some Landlords and their tenants in distress.
Sadly we are not likely to see too many more wonderful programs in future like “Homes Under the Hammer” where a novice BTL investor/landlord buys a ruined property, massively under estimates the cost and time required for repairs & refurbishment and then goes on to let the property at a great yield or sell and trouser a gigantic profit on the back of a rising market.
So there you have it, 10 of our predictions for the 12 months ahead in the Harrogate property market.
If you are interested in the Property market in Harrogate then please come along and see us and enjoy a free no obligation chat about the Lettings and Sales services we provide.
