Some statistics from the property market paint a gloomy picture at the moment. No matter where you sit on Brexit, our looming departure from the EU appears to be contributing towards, if not entirely to blame for, a market that is hesitating. At auction, lots offered are down by almost 15%, and totals raised at auction have fallen even more sharply – by more than 24%.
We can see from this that the average value of transactions has fallen; that is, there have not been so many large transactions. And this may be a sign that risk-averse investors are holding their breath until 1 November, or hedging their bets on lower-value properties.
That said, Brexit itself doesn’t change the nature of our housing crisis. With other investment opportunities less easy to come by (and the enduring appeal of tangible bricks-and-mortar investments), homes remain an obvious choice. There is still a market for lower-value commercial and semi-commercial properties too – perhaps because these often offer more square footage per pound, and local authorities are often open to change-of-use applications to ease local housing shortfalls.
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Some statistics from the property market paint a gloomy picture at the moment. No matter where you sit on Brexit, our looming departure from the EU appears to be contributing towards, if not entirely to blame for, a market that is hesitating. At auction, lots offered are down by almost 15%, and totals raised at auction have fallen even more sharply – by more than 24%.
We can see from this that the average value of transactions has fallen; that is, there have not been so many large transactions. And this may be a sign that risk-averse investors are holding their breath until 1 November, or hedging their bets on lower-value properties.
That said, Brexit itself doesn’t change the nature of our housing crisis. With other investment opportunities less easy to come by (and the enduring appeal of tangible bricks-and-mortar investments), homes remain an obvious choice. There is still a market for lower-value commercial and semi-commercial properties too – perhaps because these often offer more square footage per pound, and local authorities are often open to change-of-use applications to ease local housing shortfalls.
[caption id="attachment_997920" align="aligncenter" width="847"] Liverpool: buy-to-let yields are creeping towards double digits[/caption]
EIG figures place the average residential auction sale at £135,000, which is reflected in the finance applications which we are seeing. Regular ‘flippers’, who previously may have bought one property for cash, have realised that they can buy two or more with the help of our auction finance.
They are using their cash to pay their deposit on the day, and then speaking to us to arrange finance – we are frequently in the room on auction day. Our auction finance is funded much faster than a traditional mortgage, to ensure you meet your 28-day deadline. It lasts up to 12 months, and you repay the loan in a lump sum – typically with the proceeds of selling the property on, or with longer-term borrowing. You simply make interest payments in the meantime.
Of course, it is not just Brexit driving these lower-priced purchases; changes to mortgage interest relief and stamp duty on investment properties are starting to bite, but have far less impact at this level.
Then there is the growing appeal of the regions, where prices remain relatively affordable. At auctions that I have attended, I have met investors from London looking towards the North West and Tyneside in particular.
Brexit itself doesn’t change the nature of our housing crisis. With other investment opportunities less easy to come by, homes remain an obvious choice
With the market in London and the surrounding areas stuttering, investors know they cannot rely on the South East to deliver capital gains yields ‘just because it’s the South East’. Instead, I believe they are looking at properties offering strong ongoing rental yields.
Rents nationwide have risen with wages – the minimum wage is the same no matter where you are in the country, after all – but purchase prices haven’t always followed suit. Only recently have Kensington Mortgages published research that the north of England is strongest for affordability on residential mortgage applications; their methodology compared what borrowers could have borrowed with what they actually did.
The result is that regenerating regional cities, particularly those home to a large student population such as Liverpool and Newcastle, offer buy-to-let yields creeping towards double figures. Not bad, I’d say.
Scott Hendry is director of auction relationships at Together
Liverpool photo: Dan Abraham/Racing Fotos/Shutterstock
