It is very difficult to believe that another year is nearly over, but as we roll towards year end, here are our predictions for the North-East property market in 2018.
As always opinion of what the markets ‘will do’ or ‘could do’ will vary based on location and opinion and perception of the facts out there. Our opinion is therefore given in our area our expertise specifically, the North East and more generally regards the rest of the UK.
Volume of sales is an important factor in considering ‘the state of the market’. Although volume is down generally year to date compared to 2016, the variance is across of prices and the lower end of the market has been relatively stable. (up to £100k).
To date in 2017
In 2017, in the North East (which includes: County Durham, Darlington, Hartlepool, Stockton, Middlesbrough, Northumberland, Redcar, Cleveland and Tyne and Wear):
- 33,153 residential properties changed hands (36,956 in 2016)
- 508 of these properties sold for £500,000+ (473 in 2016)
- 30 of these properties sold for £1,000,000 + (24 in 2016)
In the lower priced properties:
- 1727 sold for less than £50,000 (2289 in 2016)
- 9904 sold for between £50,000 and £100,000 (9237 in 2016)
The average price in the North East in November 2016 was £124,799 in September 2017 (the last date available) there was a recorded increase to £130,402 equivalent to 4.4%.
Average rents in the UK increased over the period Oct 16 – Sept 17 by 0.9%, the average being influenced by a fall of 0.8% in the south east. The North-East market increased by 1.9%.
So, what will next year bring.
There is no doubt it will bring uncertainty, with both Brexit and interest rate increase looming. We expect this will slow the market potential as sellers and buyers remain cautious. However, we do expect the lack of supply to continue to support house prices at their current level at least.
A recent forecast by countrywide property predicts inflation equivalent returns over 2018 with a slow but steady increase in prices from 2019 to 2022. We would not disagree but in a market as dense as the UK, there will continue to be anomalies and opportunities as sellers particularly UK landlords, absorb the recent tax changes and strategic changes which will involve sales occur.
Sterling remains low and having seen movement from 1.45 at the beginning of 2016 to the low of Brexit and then a return to 1.33 the forecasts for 2018 are showing an increase but not a spike. Of course, the evolution of Brexit will play a major part in any variance from forecast, but sterling retains currently a strong position for the international client to enter the UK property market.
Those who are renting from private landlords will be potentially forced to continue doing so, as mortgage rates increase, and the social housing landlords continue to have higher demand than supply of stock.
Although the north east rental market pricing is still below the UK average the cost of purchase entry price is also much lower continuing to support higher yields than those available elsewhere in the UK. We do not think this will change.
The lettings market itself has a number of changes looming in 2018 not least the move to ‘no administration fees’ for tenants, longer tenancies to be offered at outset and more stringent rules for energy performance of property.
Our position on all 3, is strong.
Our transparency of fees positions us well as we do not currently charge administration fees to tenants, we have always actively encouraged longer tenancies wherever possible and a recent audit of EPC’s in place showed current compliance for the new legislation in 94.8% of our properties under management.
We do not see significant changes, but we do see a period of uncertainty over the next 12-months, but we are vigilant and will make suitable changes in our advice if we think it is needed.