Lomond Quarterly Insights: UK Property Market Q2 2023
Over the past three months, Lomond Lettings Management has witnessed an impressive 8% rise in properties under our management. This upswing can be attributed to institutional investment that is redefining the rental sector. Despite concerns over rising mortgage rates, slower inflation declines, increased legislation, and the escalating cost of living, it is essential to consider the broader market dynamics.
Our 60+ branch network has revealed a wide range of available mortgages and significant activity levels, contrary to what the headlines may suggest. Property sales worth over £267 million have been successfully completed, indicating robust ongoing activity.
Ed Phillips, Group Chief Executive, said: “Current market conditions may seem challenging but our dedicated network of property professionals are providing reasoned and experienced support to help our clients to maximise returns.”
Amidst these challenges, there are long-term opportunities for landlords to explore. Despite the evolving landscape, we at Lomond welcome compliance and see it as an avenue to enhance the quality and professionalism of the sector. Our Lomond Investment Management team is well-equipped to advise and support landlords, from individual investors to large institutional players and Build to Rent developers.
Let’s take a more in-depth look at the performance of the sales and lettings market in Q2 of 2023.
SALES MARKET
The sales market has undergone significant shifts in the past year, with prices having fallen 4.8% since the peak that occurred at the end of Q2 in 2022. However, it is essential to contextualise this decline within a broader perspective. Sales prices remain 13.5% higher than at the start of 2021, showcasing the resilience of the housing market. Historically, property prices have shown positive growth over 7-year periods, further highlighting the market's potential as a long-term investment.
Experienced agents play a vital role in guiding buyers and sellers through market fluctuations. As the mortgage market becomes more complex, buyers are increasingly seeking the expertise of mortgage advisors to navigate the landscape and gain access to flexible options and maximum choices. Despite headlines about market volatility, buyer demand continues to outpace available supply, contributing to a natural movement in the market. Many prospective buyers re-negotiate mortgage offers during the conveyancing period to ensure the most suitable deals, adjusting budgets, search locations, or property specifications according to their financial positions.
HOW WE PERFORMED
Despite the market fluctuations, our teams delivered 41 instructions per branch from March – May 2023, up from 28 in the same period last year.
We recorded an average of 90 valuations and 12 viewings per instruction across our branch network, followed up by 238 applications per branch – an increase of 46 compared to twelve months prior. Lomond also averaged 18 exchanges per branch in Q2, which continues to be a market-leading level.
LETTINGS MARKET
The rental market in the UK has witnessed significant activity, with a notable 22.4% increase in rental applications during Q2 2023 compared to the same period in the previous year. Seasonal peaks, particularly driven by student demand, have intensified the rising demand levels. However, the supply of rental properties remains constrained, creating upward pressure on rents. In the last three months, Lomond Lettings Management registered a staggering 27 new applicants for every listed property, further illustrating the demand-supply imbalance.
Renters are also showing a preference to remain in their tenancies for longer durations as they cautiously monitor the broader economic picture. This extended stay exacerbates the supply issue, presenting challenges for those looking to secure rental properties. The shift in location preferences is evident, with renters now living a median of six miles from their workplace, up from five miles pre-pandemic. As offices reopen, there is a growing desire to move closer to city centers, leading to heightened competition for such properties.
Despite these challenges, the Royal Institution of Chartered Surveyors predicts a rental growth of 6% per annum over the next five years. The rental landscape is also undergoing significant changes with the introduction of the long-awaited Renters Reform Bill. The bill aims to make the private rented sector safer and fairer for tenants, proposing the elimination of Section 21 no-fault evictions and the implementation of period tenancies instead of fixed-term ones. The rental sector is becoming increasingly professional, with investors viewing it as a viable medium to long-term investment option, offering potential for capital growth, rising rents, and attractive yields. Investors without mortgages or with lower loan-to-values are in a particularly strong position to capitalize on these opportunities.
HOW WE PERFORMED
Our teams achieved 14 instructions and agreed 79 tenancies from 371 applicants per branch in Q2, averaging 27 applications per instruction and 33 viewings for every new instruction we brought to the market.
SUMMARY
To summarise, the UK housing market has been through notable shifts in recent times. The rental sector is experiencing increased demand, compounded by the seasonal peak in student renters. The supply shortage is contributing to rising rents, and renters are showing a preference for longer-term tenancies. The sales market, although experiencing a decline from its peak, remains resilient, with prices still significantly higher than the start of 2021.
Overall, both the rental and sales markets present unique opportunities for landlords, investors, homeowners, and renters. The real picture of the UK housing market goes beyond the headlines, and it is crucial to understand the underlying trends and dynamics that can impact decision-making. By leveraging data and expertise, Lomond Lettings Management aims to provide reasoned and experienced support to help clients maximize their returns and make informed choices in this ever-evolving market. As the market continues to adapt, we anticipate continued opportunities for those prepared to take a long-term view in the UK's dynamic housing landscape.