Despite the prospect of a phasing out of the Stamp Duty holiday next month, the UK property market continues to perform exceptionally well for investors.

The well-established gulf between demand and supply remains a very potent force in the market. It’s expected to sustain price growth over the coming months, even if an end to the SDLT holiday reduces transaction rates, as most believe it will. There is good historical evidence to suggest that demand will fall back later in the year when the tax is reintroduced but, for now, buyers are keen to take advantage of the window of opportunity, and business is booming.

Currently, rental values are rising at their fastest rates in years, and capital growth is also breaking records. We’ve previously commented on several industry reports that demonstrate the fast pace of house price growth, and it’s clear that property investors are faring well. Around a quarter are reportedly planning to buy more properties next year and, with BTL mortgage costs now falling, more might well follow suit.

Demand Versus Supply; a Continuing Imbalance

Recent data from NAEA Propertymark (May 2021) has found that the number of properties selling for above the asking price has hit an all-time high. Underscoring the continuing strength of the market, the company’s latest Housing Market Report shows that 32% of transactions were completed above the asking price – the highest proportion ever reported. (The previous record, of 19%, was set in May 2014.)

Numerous publications seized upon the figures, particularly the statistic that prospective buyers now outnumber properties by a ratio of 16 to 1. That is a product of two factors: very low supply and exceedingly high demand. The high demand has been well documented but the supply side is also worthy of note. NAEA states: “our report showed that the supply of properties reached the lowest number recorded since December 2002.” In other words, on both sides of the equation, upward pressure on prices is still mounting.

Findings & Extracts:

    • “The average number of house hunters registered per estate agent branch is 427, which is an increase from 409 in March and is the highest April figure since 2004.”
    • “The number of properties available per member branch fell from 31 in March to 27. This figure is the lowest recorded since December 2002.”
    • Mark Haywood, NAEA’s chief policy advisor said: “It is phenomenal to see demand for housing breaking records, as house buyers continue to fuel the post-COVID-19 economy. The continued imbalance of supply and demand … has led to a strong sellers’ market with properties being snapped up quickly at high prices.”

The Falling Cost of BTL Mortgages

Numerous UK media published articles this week focus on the falling cost of BTL mortgages. On 25th May, The Telegraph noted “Landlords have been urged to take advantage of low interest rates after the cost of buy-to-let mortgages dropped to the lowest level seen this year.”

According to MoneyFacts, the average interest charge on a two-year fixed-rate buy-to-let mortgage has fallen by 0.04% to 2.95%, while the cost of a 5-year equivalent is down from 3.35% to 3.3%. These represent the lowest levels since the start of the year.

Findings & Extracts:

    • The Telegraph writes that “many landlords are preparing to buy more properties against a backdrop of rising rents across most of the country. More than a quarter plan to expand their portfolio over the next year.”
    • Moneyfacts writes: “we have seen rate reductions of as much as 0.90% from TSB, while Virgin Money made cuts of up to 1.06% on a selection of its products this month.”
    • “Falling BTL mortgage rates will not only benefit landlords looking to re-mortgage, but will also be welcomed news to investors considering investing in a BTL property, especially as average rents have risen since April.”
    • “The rise in rental growth may well be linked to the fact that there were 45% fewer homes available for rent in April 2021 compared to April 2019.”