So here we are at the beginning of a new year and one of the most impressive stats that we look back on goes back not just to 2015 but over the past 20 years. A report just out by PPRM suggests that property has outperformed every other major asset class at an average annual increase of 9.34%. In fact an investment in the London property market 20 years ago would have performed 2.5
times better than the FTSE and four times better than gold, which was actually only marginally ahead of cash savings!
Most of this gain has been via capital appreciation, and rental yields have now fallen slightly representing an average of 4% in the northeast and just 2.7% in London, although Oakfield’s Landlord clients tend to average much more than this.
Of course, for most homeowners, property is a tax free investment. The tax angle on buy to let is certainly going to be more noticeable this year, with a 3% levy on second homes and a phased reduction in the amount of tax that can be claimed against a mortgage.
As a hedge against possible downturns, good old bricks and mortar have been very kind to us. Looking back on the recession of 2009, residential property fell 14% whist the stock market fell by a whopping 41% and has been slower to recover.
2015 ended with Rightmove telling us that asking prices were up 7.4% on the year, but that is just asking prices of new-to-market properties of course, whilst the Land Registry confirms that actual selling prices are up a more modest 5.6%, which is still very respectable indeed, with demand continuing to outstrip supply.
But don’t be fooled by continual talk of uplift. In fact, if you are selling it’s more important to listen
to what you estate agent has to say about other properties that might be competing with yours, than it is to dwell on reports of the housing shortage pushing up prices.
Be careful also about which offer you accept. Last year there was a rise in arranged sales that fell through – in fact, according to a survey released by Quick Move Now nearly 30% of sales arranged fell through towards the end of last year. This has been attributed to buyers desperately putting in offers to secure a scarce property and then either getting cold feet or subsequently reducing their offer (or gazundering). The increased time it now takes to get a mortgage is certainly a factor here as well.
So do make sure your agent really qualifies every buyer and only accept an offer from someone who really is ready, willing and able, with no related sale and ideally a mortgage agreed in principle.
One thing that is encouraging is the increase in the number of first time buyers – up around 24% on last year, albeit with a purchase price of about 5% less than last year at around £150,000, with the average first time buyer getting an 83% mortgage.
There has also been a corresponding uplift in remortgages – possibly parents raiding the Bank of Mum and Dad for that average £25,000 deposit.
In terms of the year ahead there are mixed opinions about interest rates and the economy, but unemployment and inflation remain low and the general consensus is that it is likely to be a fairly stable year, which is always a good thing for home buyers and sellers alike.
Neil Newstead, FARLA MARLA
CEO – Oakfield Estate Agents