BRIGHTER THAN WE MIGHT THINK

The end of 2022 wasn’t easy for anyone, including property investors. Mortgage interest rates skyrocketed, ongoing uncertainty about PRS legislation and minimum energy efficiency standards and increasing speculation about an imminent housing market crash. I understand why many of my landlord peers aren’t enthusiastic about 2023. And yet, I am.

Chatter around a housing market crash gives many of us unnerving flashbacks to 2008 (and maybe the 90s). However, the experts predict it’s unlikely to be anywhere near that bad. While sky-high inflation (currently 10.5%), rising energy prices, and an ongoing cost-of-living crisis indeed point towards recession, we don’t expect a significant rise in unemployment. The Chief Economist at RICS believes “the downturn in the housing market this time could be shallower”. More employment stability means fewer repossessions and forced sales, which in previous crises diluted the housing market when demand was low, crashing prices.

What’s more, the consensus from experts like Nationwide and Savills is that values will only fall by 5-10% in 2023. Crucially, prices will start recovering by 2024, and we’ll see 6.2% growth by 2027 (Savills). This momentary softening of prices offers property investors a fantastic purchase opportunity. Sweetened by the fact that buy to let lenders are willing to lend and capital gains will return swiftly.

The latest report from the ONS shows rents increased 4% in the 12 months to November 2022. However, new tenancies are seeing the largest rises, 7.9% for the same period

(Hamptons). Clearly, this growth rate is not sustainable for tenants, who now spend, on average, 35% of their monthly income on rent.

Nevertheless, Zoopla predicts rental growth will only slow to 5% over 2023, continuing the upward trend. What’s driving this? Demand. Enquiries for rental properties are up 46% on the five-year average, while available PRS properties are down 38%. With many first-time buyers delaying purchase plans due to tight affordability calculations, demand will only increase. Furthermore, existing tenants are staying in properties longer due to rent increases for new tenancies, so void periods will be minimal.

I know legislation uncertainty hangs over our community like an ominous weather front, but I stand by my previous statements that this is not yet cause for rash decisions. Rates have, thankfully, stabilised and crept down. While there may be a little more downward movement, this is the new normal, so speak to your broker to ensure you’re getting the best deal.

I’m genuinely optimistic about the opportunities available to landlords this year. It’s not perfect, but there’s investment potential if you know where to look and have the right team of experts supporting you.

November

Why The North East Delivers For Property Investors At All Stages Of The Investment Cycle

Some investors want the ‘hands-off’ approach. Working with an experienced partner to guide them through the process. Managing everything including sourcing the property, arranging finance, overseeing the legal process, undertaking refurbishment works and retaining the property for management.

Others may want to build their own portfolio but need to source the relevant skills and knowledge to get started.

Alternatively, a joint venture might be the preferred approach. Though often the sums available aren’t extensive enough to take a project forward. This is where investment in the North East becomes a really compelling, viable proposition.

Traditionally, investment in the capital was the panacea for building a profitable property portfolio. However, despite house prices in London typically being the highest in the country, rental yields can be average.

Lower capital entry, higher yields and high demand is turning buyers towards regional areas to achieve maximum results.

Why the North East?

The North East of England, particularly Teesside which covers Middlesbrough, Stockton, Hartlepool, Redcar, Sunderland, Darlington and Durham, poses fresh opportunities for investors.

Here, rental yields are much higher than other parts of the UK. Private rental yields are consistently more than 7% Net. Buy smart and 8-9% is quite normal. Our own serviced accommodation units across the region currently yield well over 13%.

2023 predicts a 5% mortgage rate as the norm. Presently clients are arranging mortgages on a 5-year fix of 5.5%. When calculating yields and income, this needs to be taken into consideration. It’s realistic to expect a return on capital of 10%+ on a mortgage of 75% Loan to Value forecasting.

Take property in London as an example. Many properties yield around 4%. However, the outcome isn't favourable when working with a mortgage rate of 5%.

Here in the North East, the governments’ levelling up programme, alongside projects like Teesworks; the UK’s largest and most connected industrial zone, has had a positive impact on the surrounding real estate market. Good capital appreciation is expected over the coming years despite other parts of the country seeing a downturn.

Getting the Right Support

Setting realistic expectations is a challenge for landlords. Information shared on social media or during unreliable property training courses is often shrouded in misconception and leads to unrealistic confidence.

That’s why choosing the right property investment partner is so important.

Horizon Property service the needs of property investors, at all stages of the investment cycle. We’re a high street estate agent that also source a lot of stock that may not be on our books, actively investing ourselves in varying forms.

Our management propositions include private rental, serviced accommodation and social housing, or supported living leases.

In 2021 we partnered with Workstays to offer a wraparound sourcing and management proposition for clients wanting hands-off investment in serviced accommodation. Resulting in three distinct propositions:

Portfolio Building

Working with clients on a hands-off basis, helping them build a profitable property portfolio that we can manage.

Property Training

2-day training course programme in Middlesbrough. Aimed at clients wanting a ‘hands-on’ approach to building their portfolio. A realistic approach to getting started.

Joint Ventures

Range of options including a mechanism allowing multiple investors to joint venture with us, with investment starting at just £10,000. Similar to crowdfunding, this property bond is backed up by 1st charge security with an FCA Regulated Trustee.

Work with Horizon Property to build your portfolio, upgrade your knowledge or lend capital towards our own projects for a fixed return.

To learn more please email Denis Shail: denis@horizonsaleslettings.co.uk