Consumer spending and investment property l Vesta blog

Consumer spending and investment property

September 6, 2023

This month, we've got our eyes on some compelling data from Nationwide Building Society and Rightmove, which could influence your decisions to buy or sell investment properties. Let's dive in!

Economic pressure on households

The latest Nationwide Spending Report reveals a 6% year-on-year rise in overall spending in July. With 62% of people concerned about their ability to cover essential expenses, financial anxiety is on the rise for the first time since May.

What it means for property investors:

If you are looking to invest in property, be mindful of the increasing essential costs, particularly in rent and mortgage payments, which have risen 27% and 16% respectively year-on-year. With consumer sentiment slightly shaky, selecting properties that offer essential amenities and more affordable rents could provide a more stable income stream. On the flip side, if you are looking to offload properties, now could be the time to do so before consumer sentiment potentially weakens further.

Essential vs. non-essential spending

Despite financial worries, significant increases were recorded in non-essential categories like airline, digital goods, and leisure & recreation. While essential costs saw a mixed bag - with rises in rent, mortgage, and insurance offset by declines in fuel and vehicle costs.

What it means for sellers:

If you are looking to sell, consider that buyers may be more cautious with their spending but still willing to invest in non-essentials, like property. Make your property appealing by highlighting its investment potential and available amenities, which could tip the scales in favour of a quicker sale. You also need to ensure you set the right price in the current conditions.

House price trends according to Rightmove

Rightmove's latest House Price Index indicates a 1.9% drop in average new seller asking prices, falling to £364,895. However, don't be alarmed; average prices are still 19% higher than in the pre-pandemic market of August 2019.

What it means for buyers:

Lower asking prices and recent longer-term decreasing mortgage rates are tentative steps towards improved affordability. If you have been on the fence about investing, these price adjustments, coupled with higher average earnings, may offer a more favourable investment landscape. Most sellers are not desperate to sell and will hold onto their property rather than sell for a significant discount so even though prices are coming down you are unlikely to get bargain discount prices. Offers below 90% of the asking price (and many above) are being declined very rapidly so do your sums and don't waste time with unreasonable offers for good BTL stock.

First-time buyers & rental market

Rightmove's data also shows that the first-time buyer sector is holding up well, largely because of record-high rents and the scarcity of rental property. Average advertised rents are up 12% compared to last year, making buying an increasingly attractive option for those who can't afford it.

What it means for investors:

Investing in properties aimed at those on the path to becoming first-time buyers could be a smart move. As rents continue to soar, the demand for affordable pre-starter homes is likely to grow, offering you a solid return on your investment. This is also a growing segment of the rental market improving demand and yield.

In summary, the data points towards a cautiously optimistic property market, with both challenges and opportunities lying ahead. Whether you are looking to buy or sell, understanding these market dynamics can offer you a crucial edge. 

Important Note

All information contained in this website is provided as a guideline only, is based on estimates and assumptions, may not be accurate or complete, and is subject to change. We make no representations or warranties with regards to this information, expressed or otherwise. A buyer who relies on such information does so at their own risk. Buyers are advised to seek independent financial advice and should undertake their own due diligence.

Your capital is at risk. Property values may decline and the property might not be able to be rented at amounts sufficient to cover debt interest costs, operating expenses and liabilities, and might not result in a positive cash flow. Property is an illiquid asset and should not be viewed as a short-term investment.

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