As we go headlong into 2018, I predict that UK interest rates will stay low, even with the additional 0.25% increase that is expected in May or June. This rise will add just over £20 to the typical £160,000 tracker mortgage, although with 57.1% of all borrowers on fixed rates, it will probably go undetected by most buy-to-let landlords and homeowners.
I also think it’s unlikely that we’ll see any more interest rate rises due to the fragile nature of the British economy as it continues to navigate Brexit. Even though mortgages will remain inexpensive, with retail price inflation outstripping salary rises, it will still very much feel like a heavy weight to some Bicester households.
We know that the Bicester housing market in 2017 was a little more subdued than 2016 and that this trend is likely to continue into 2018. Property ownership is a medium-to-long-term investment, so it’s important to take a long-term view – the average Bicester homeowner who bought their property 20 years ago has seen its value rise by more than 302%.
This is significant, as house prices are a national obsession and tied to the health of the UK economy as a whole. The majority of this historic gain has come from property market growth, although some of that will have been aided by homeowners modernising, extending or developing their Bicester home.
Taking a look at the different property types in Bicester and the profit made by each type, makes for interesting reading…
|Property type||Average price|
paid in 1998
paid in 2018
|Average total profit|
over the last 20 years
p/m over the last 20 years
|Overall Bicester average||£76,732||£307,355||£230,623||£960.93|
However, let’s put aside the historic growth and profit, and focus on what is likely to happen in the future. I want to highlight the key factors that could affect future house price growth/profit in Bicester and the rest of the UK.
One such factor has to be the building of new homes both locally and nationally. This has picked up in 2017 with 217,350 homes coming onto the UK housing ladder in the last year (a 15% increase on the previous year’s figures of 189,690). However, Philip Hammond has set a target of 300,000 a year, so still plenty to go!
Another factor that will affect property prices is my prediction that the balance of power between Bicester buy-to-let landlords and Bicester first-time buyers will tip more towards local first-time buyers in 2018.
The Council of Mortgage Lenders expects the number of buy-to-let mortgages to drop by 34% from the levels seen in 2015 as a result of tax increases and stricter lending criteria for buy-to-let mortgages. This means that you would expect to see a gradual shift in the balance of power in favour of first-time buyers rather than buy-to-let landlords. First-time buyers will also be helped by The Chancellor’s recent announcement that Stamp Duty will be eradicated for all properties up to £300,000 bought by first-time buyers.
This means that buy-to-let landlords will have to work smarter in the future to continue to make decent returns (profits) from their buy-to-let investment. Even with the tempering of house price inflation in Bicester in 2017, most Bicester buy-to-let landlords (and homeowners) are still sitting on a copious amount of growth from previous years.
The question is, how do you, as a Bicester buy-to-let landlord ensure that it continues?
Since the 1990s, making money from investing in buy-to-let property was as easy as falling off a log. However, given all the changes in the tax regime and the balance of power, making similar levels of return in the future won’t be as easy.
Over the last ten years, I have seen the role of the forward-thinking letting agents evolve from a ‘rent collector’ and basic property management to a more holistic role, or as I call it, ‘landlord portfolio strategic leadership’.
Thankfully, there are a handful of letting agents in Bicester, myself included of course, who I would consider exemplary at landlord portfolio strategy. The process involves providing you with a balanced and structured overview of your short, medium and long-term goals in relation to your required return on investment, yield and capital growth requirements.
If you would like to discuss this in more detail, I would suggest speaking to your current agent in the first instance, or alternatively, feel free to contact me. Whether you are an existing client of ours or not, there is no cost and no expectation of commitment.