January concludes our Christmas and New Year advertising campaign for 12 leading companies in the UK Rental Property suppliers’ market. All our participants have contributed enthusiastically, joining in the spirit of the season by providing special offers for the benefit of our readers.
Christmas seems such a long way away now, but this year January has been somewhat brightened by the figures coming out of Whitehall and the City of London, as well as respected sources such as the IMF, regarding our improving economy and employment statistics.
2013 saw something of a renaissance in the investment property market with buy-to-let mortgage applications reaching their highest levels since before the economic crisis in 2008, and that’s despite the much tougher lending criteria now being applied.
The IMF forecast GDP growth for 2014 at 1.9 per cent back in October, but has now revised this figure to 2.4pc, a figure it thinks is likely to be one of the highest among all of the world’s advanced economies. This revision follows a similar one from three months ago when the IMF increase its earlier prediction in April from 1.5 per cent.
According to the Daily Telegraph this underscores the speed at which sentiment on Britain’s economic recovery has progressed, and this is supported by other forecasters including the Bank of England and the Office for Budget Responsibility (OBR) who have both also upgraded their growth projections.
Figures due for release from the Office for National Statistics (ONS) next week are, according to the Daily Telegraph, expected to show the UK economy grew by 0.8pc in the last quarter of 2013.
Growth at this rate would mean the UK economy grew by a total of 1.9pc in 2013, well above the OBR’s December forecast of 1.4pc.
Predicting increasing optimism in the global economy, Christine Lagarde, the IMF’s MD, has said that although there is still a lingering crisis, a more stable outlook and optimism is in the air means that she has great hopes for 2014 as a game changer.
Whilst some are still pessimistic about Britain’s economic recovery, being over reliant on consumer spending and a rising housing market, stoking fears of another housing “bubble”, others feel that these upgrades are really significant.
Middle incomes are still under pressure. With no real increase in wage levels predicted until into 2015, fears that recent falls in unemployment will result in the promised Bank of England governor’s trigger of interest rate rises, once the unemployment figure reaches 7%, a figure which is now well within sight.
Commentators in the know are predicting a positive outlook for landlord investors in 2014 and we are now seeing the “ripple effect” of the steadily increasing residential property prices seen for some time in London (something of a special case) moving out to the provinces, with prices showing healthy gains in the North and Midlands, particularly cities like Manchester, Leeds and Birmingham.
A similar story is emerging in the commercial sector, with signs of an improving business environment and firming property values. Despite the fact that there’s a definite structural change in retail, and many towns are still in the doldrums, selected centres are starting to pick up, and we should see rents rise again as demand starts to firm and outstrip supply. The proposals on Business Rates coming out of the chancellor’s Autumn Statement will add support to this sentiment.
There could be some exceptional opportunities for astute investors, picking up properties at bottom of the market prices, for example conversations of shops and offices into retail use on the periphery of retail centres. Much relies on the general prosperity of the area, but there is so much latent demand for good quality accommodation in many regions, the opportunities are there, but they may be hard to find at the right price in the best centres.
No matter how optimistic the outlook, there are always the negatives; threats looming on the horizon which may affect profitability in the future: increasing regulation; landlord registration; new forms of tenancies; and a general “down on the buy-to-let landlord” as a generational shift in prosperity, and a so called favourable tax regime for landlords, enters the general public consciousness.
One genuinely worrying development affecting those landlords owning properties vulnerable to flooding, and our hearts go out to those affected over the recent wet weather period, is the threat of excluding rented homes from the long awaited flood insurance subsidy fund – “Flood Re”.
The landlords’ associations and buy to let mortgage lenders are currently urging ministers to seriously rethink this one. The proposals argue that a large slice of the UK’s 4m privately rented homes are at risk of being left without affordable insurance cover, which would inevitably lead to widespread disruption for tenants and local authorities.
Government ministers and officials are arguing that they said from the outset of this scheme that commercial enterprises will not be covered by Flood Re, a safety net scheme to be funded by a levy of around £10 on every home policy in the country.
The British Property Federation is now warning that the entire private rented sector could be considered “non-domestic” for the purposes of this scheme.
According to the Financial Times (FT) between 50,000 and 100,000 privately rented properties are in higher flood risk areas and the British Property Federation is claiming that “millions” of properties could be left without affordable insurance, pointing to a series of exclusions from Flood Re, including leasehold properties, small businesses and higher-value homes.
This warning comes as the Flood Re fund is passing through the House of Lords for a second reading, and we await developments.
Tom Entwistle, Editor January 2014
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