Supply and demand imbalance
April 8, 2022
House prices continued to rise during March by 1.1%, with annual growth now at 14.3% according to Nationwide. London's growth so far this year is half that of Wales at 7.4% versus 15.3%.
Despite the increasing new instructions of investment properties on Vesta, according to RICS, more and more surveyors, though still a minority, are seeing an increase in new instructions. Many high street agents are really struggling to get new listings and their windows are full of SSTC and SOLD property photos. The limited availability of owner-occupier stock, largely driven by the lack of people selling their homes, is continuing to drive an upward trend in prices across the country. Demand outstrips the available properties so competition to win the purchase is pushing prices up.
Sellers are also in a great position to negotiate commissions with agents and to be aggressive with purchasers.
The massive hike in energy costs is likely to have a slight dampening effect as will the overall economic outlook with costs rising almost everywhere. There is a big question on whether this will have a dampening impact on demand or whether the backlog created by the lack of availability of stock might help continue to have an upward impact on prices for some time to come.
Rising interest rates are likely to have the biggest negative impact on prices as lenders become more cautious on lending decisions and LTVs being offered. This will normally have the biggest impact on first-time buyers who simply will be unable to get on the ladder due to the hikes in their own costs and increased mortgage costs. It will become harder for them to save that nest egg for their deposit which means they will rent for longer.
From an investor's perspective, there are some positive signs. Rental values continue to grow as demand increases and with more and more people staying in rentals this is unlikely to slow down. In addition, as mentioned in a previous newsletter, the UK is once again seen as the better option as a base for many of those people who 'went home' during the first pandemic to their 'safer' countries like New Zealand and Australia, to mention a couple. The job opportunities are once again booming! With flights back on and many of these countries now having their own pandemic lockdowns, the work (and play) environment in the UK is very attractive.
At Vesta we are seeing record demand month-on-month from funds and institutional investors flocking into or growing their investment property portfolios. We anticipate a continued migration of investment properties from smaller landlords to bigger institutional-style landlords.
If you are considering selling or buying an investment property or simply want an investment valuation, please get in touch, or visit www.vestaproperty.com/sell so we can start the process with you.
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