Q4 Property Market Insight – LandlordZONE

Exorbitant energy bills continue to fuel the ongoing cost-of-living crisis, and continued rate hikes put downward pressure on the property market. But is it all doom and gloom, and what does Q4 have in store for the UK property market?

Property growth is slowing

As the cost-of-living crisis endures, the Bank of England’s seven rate rises since December 2021 are certainly having the desired effect on reducing inflation when it comes to the property market.

While house prices decreased by a marginal 0.1% for the month of September (compared to a 0.3% rise in August), the annual rate of growth dipped further from 11.4% to 9.9%. This is the first time that the annual house price inflation figure has entered single figures since January 2022. According to Halifax’s latest report, this brings the average cost of a UK property back down to £293,835 from the record high of £293,992 seen in August. 

The current Bank rate sits at 2.25%, and experts expect another marginal increase, further impacting mortgage costs. That said, current Rightmove data shows buyer demand is still up 27% compared to 2019, and average new seller asking prices are up 1% compared to one month ago. 

Rental prices and demand continue to rise

Rents have surged across most UK regions since the beginning of the year, particularly in London, the North West, Wales and Scotland. 

Demand for rental properties is also at an all time high, with Rightmove data showing that unique rental enquiries across the UK stood at 567,000 in September 2022, a huge 43.6% increase from five years ago. 

With such an increased demand for renting, this is pushing up rental prices, making for attractive yields for many investors.

1 & 2-bedroom apartments are back in demand

The cost-of-living crisis appears to be pushing renters into smaller flats. The demand for one-bedroom flats rose to 31% (as a percentage of applications of all property types) in August 2022, while applications for two bedrooms also increased to 35% for the same period. Conversely, demand for two and three-bedroom houses dropped to 11% and 12% respectively. 

In addition to cheaper rents, tenants are attracted to one and two-bedroom apartments given their cheaper/more efficient running costs when compared to a house. As we approach the winter months, renters are making moves to reduce their outgoings – it costs approximately 40% less to keep a purpose-built apartment compared to a three-bedroom terraced property, while flat conversions are also estimated to be 25% cheaper to heat.

Eco-friendly properties are more desirable

A new study from Knight Frank compares the Energy Performance Certificates (EPC) ratings of 30,000 properties in relation to their home’s value. The results demonstrated that improving the energy efficiency of a property can improve its value above and beyond any local average growth; the homes which had an improved rating of C from D were seen to achieve an extra 3% in value growth in addition to any average local price growth. This additional growth was found to equate to the equivalent of around £9,000 (based upon average local resale values). 

In addition to the potential for increasing a property’s value, carrying out eco-friendly improvements can make it more desirable to tenants too. Especially given the current cost-of-living crisis and soaring energy bills, energy-efficient homes are in increasingly high demand.

If you are considering renting a property, get in touch with our friendly team of property experts at Leaders and see how we can help.

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