What now for off-plan property sales in the UK?
So, general election fever is dead and buried. For now, anyway. But what impact is the hung parliament likely to have on off-plan property sales? We think the effect may be muted, especially in the regional cities where recent investment news has indicated resilience, stability and growth.
There will, of course, be warnings from property experts who predict the collapse of property values across the UK. Newspaper headlines will trumpet the demise of the buy-to-let investor. A period of political uncertainty as we dodge Brexit bullets, on top of UK property tax changes (which supposedly mean that “BTL is no longer profitable”) will prove the death knell for investment in the UK. At least, this is what the scaremongers would have everyone believe. Hasty developers may be tempted to pull their off-plan sales plans.
Swift action needed and taken
Perhaps we should learn from recent history. In 2010, the conundrum of the hung parliament was answered by the formation of a coalition government after several days of negotiations. Contrary to what people expected, the Conservative/Liberal coalition saw out its term. The government proved to be stable.
Mrs May has acted even more swiftly than David Cameron did in 2010. Within hours of everyone waking up to the news of a hung parliament, and wondering “what next?”, Mrs May announced she would seek a deal with the DUP, and put a new government in place.
In the aftermath of the vote, the pound fell by around 2% against the dollar and the euro and then stabilised. The stock market, which many expected to collapse, rose by a shade more than 1%.
The swiftness of Mrs May’s actions has gone some way to calm the markets. The need to keep the DUP on board might force the Brexit negotiation team to be less confrontational. The chances of a good deal for the UK may increase.
No bounce in property values, but an opportunity to take advantage of fundamentals
The post-election bounce in property values that many had predicted after a convincing Conservative victory may not happen just yet. However, if the negotiations begin well and the Con-DUP pact remains solid, there is no reason why UK property values should not perform similarly to the period between 2010 and 2015. The exception may be that this time around London gives up its star billing to the regional cities.
This election has not changed the startling shortage of new homes in the UK. In January 2017, the National Audit Office reported that there are more than 71,000 homeless households in England. A Parliamentary report confirmed estimates that demand for homes in England runs between 232,000 and 300,000 a year. The government’s target of 200,000 new homes built each year would fall some way short of the lowest estimates of demand, even if housebuilders had the capacity to pump up supply to target levels.
By the end of this parliament, investors from the UK and overseas who buy off-market and off-plan property in this market lull could be looking back and congratulating themselves for taking advantage of a politically prompted pause in the property market.
Investment attention turning away from London
London will continue to be a major centre for property investment, but the focus has shifted in recent months. Property in cities like Liverpool, Birmingham and Manchester are more affordable. Yields are higher. Significant spending on infrastructure and regeneration is ratcheting up inward investment.
Off-plan property is still in demand in these key regional locations. Supply has failed to keep pace with demand. Population growth, both at current levels and forecast, could widen this differential. Multi-billion pound projects, such as HS2 and HS3, offer significant potential for future growth. Travel times between major cities in the Midlands and the North and to London will be slashed.
We’ve seen increased interest from overseas investors in particular. The most recent fall in the pound is likely to prompt renewed search for value property investment opportunities.
Regional cities in early-stage recovery, says Hometrack
In late March, the Hometrack Index report concluded that England’s regional cities are in an early-stage recovery phase. It reported that:
- Sales volumes in Liverpool and Manchester are up by more than 40% in three years.
- Manchester’s price growth is leading all cities at 8.8% in the last year.
- Prices in Birmingham, Leicester and Portsmouth increased by more than 7%.
- Liverpool’s property price growth was not far behind, at 6.8%
- However, London’s price growth has fallen to 5.6%.
Although the report predicted temporarily slower demand in the regional cities due to the impact of Brexit and economic uncertainty, its forecast continued upside in property prices and activity.
Liverpool – a buy-to-let paradise?
Recent news from Mistoria Estate Agents is evidence that Liverpool’s private rented sector is in the middle of a huge boom. Demand for tenancies is up by almost 20% across the city. Property investors in this university city are seeing unprecedented demand from students, with almost seven tenants chasing every room in shared buy-to-let property. High-quality rental properties are also in high demand.
Here, rental yields are among the highest in the country, with average yields a third higher than the national average. Some property opportunities offer yields of 10% and more, with property highly affordable for investment.
Opportunities that our investors are seeking
High gross yield and high growth opportunities are exactly the types of investment our investor client base is searching for. These investors understand that UK property fundamentals remain strong, despite the recent political shambles. Pinpointing locations for profitable investment is what our investor clients expect of us. Working with developers providing the best quality off-plan property sales is how we achieve this.
Contact us today on + 44 (0)207 923 5680, and we’ll start developing our segmented investor client lists specifically for marketing your development in London and the regional cities.
Live with passion,
Brett Alegre-Wood