3 min read
23 Oct

In this Blog I will answer some of the most common questions we are asked about the 2023-4 recession, why are rents high and what is our view of the market going forward? To answer this I will draw on my Property Buyers and Sellers feedback over the last decade, mention the Political damage for many, and how my business helps many and why now is a great time to Buy a property! 

The Berwyn Property Services team feel that we could well be within a recession now, and looking at data we have, we can see some significant challenges within the Property sector becoming visible in Nov-Dec this year. One of the biggest factors I look at is the number exiting fixed rate Mortgages in the next few months! Many facing higher mortgages costs will also lower consumer spending which is a vital consideration to rents and the property market health. Often you will hear people say less discretionary spending will have wider ripple effects on the spending in the UK! This is when people spend less and the whole economy slows. 

If Mr or Mrs Smith have less cash each month for that £4k holiday and any new cars, then they will spend less very quickly, and less cash flowing is not good for anyone. Economically this is a disaster, as you buy less conservatories or new windows for your home, so the local window firms spend less, and we have all the ingredients for stagnation, and a deep recession! The pound in your pocket is a powerful thing! In my view looking at UK’s forecast growth and no solution to the vast Brexit impact, then we probably are in a recession now. The rental prices are driven by Landlords having extra costs, as many fixed mortgages ended, and rising repair costs/insurance etc adding to reduce a landlord’s income (read profit). This explains why I am contacted many times by Landlords wanting a quick sale from my team of contacts.

Speaking with a decade plus of being a landlord I can honestly say the Tory Government (since Osborne days) has progressively made it less and less attractive to be a landlord. Which is wrong as it stops entrepreneurship, which drives up rental prices as landlords exit stage left. So, we have less options (choice) of rentals, and as mentioned below, having less finance available will drive up rental prices as its harder to actually buy a home. 

Looking at RICS UK Residential Market Survey data and gathering my thoughts from this year and looking at the next, I would estimate rents will be remain high until the economic challenges ease or the market gets lots of homes up for sale with more finance options. I can recall lots of examples of people downsizing and even moving into rental property after selling a home in 2023. The reason they explain to me is that they want to wait for a better market. This in my view is extremely risky as you are waiting for a stronger market, that means higher house prices as the number of buyers rises. Hence my feeling now is a great time to buy and not when we are in a boom time for house prices rising! (We are currently helping an Investor with a Joint Venture (JV) in October and they could achieve a £37k profit over the next six months based on the strategy were building for them. The house we are looking at buying is being sold as a home owner is moving abroad and our investor is seeing inflation impact on the funds they have. If you want to know more about this JV or others were working on, then contact the team.)  

The Tory Party Damage to Housing market and mortgage availability: The prospect of a new Political Party will also impact on the Property market performance, and this should be factored into any 2024 forecasts. Based on the last few Political conferences, it would seem that Rishi’s party will be replaced within a year. Don’t underestimate how quickly Government own goals (mistakes) can impact on property prices and market confidence! Given it’s a buyer market, and we can see home builders are on the beach, waiting for a better market then this is not good for prices. If builders are sitting on land, and a lack of clear economic stimulus strategies on offer from the Tory party, then less homes are available to buy or rent, again fueling rentals demands. Also having less finance available (Mortgages) also reduced our house purchasing power in 2023, so some are forced to rent, again driving rents up. Liz really did impact on many millions in just one month!  

The many solutions are clear to the Government, yet we hear nothing from the current PM. So, yes today is a good time to buy if you use diligent buying practices, and the demand for rent being high should add to your confidence of renting your new purchase, so for some the opportunities are great. (I have recently helped a client buy a home for £203k that’s worth £318k when refurbished, and I know the rental income is extremely strong for this 2-bed home. Property purchasing will always have an element of risk, but by using the proven correct strategy we aim to reduce risk!) A key risk to prices and rental prices is the old formula of demand and supply. Now consider the fact we could see a market flooded with homes for sale in the next 4-6 months, then house prices could fall again unless the Government takes big steps to help the housing market and the economy. 

In Summary: The rental market prices will stay high unless the market is flooded with homes, and more mortgages. so need to encourage Landlords to stay in the sector. But I also note that the Property market will stabilize as it always does. The Government needs to act, it needs a new strategy, and maybe they should gather feedback from those within the sector? What do you think?

Our team are busy working on a Joint Venture that is building our property portfolio. See Our JV page on our website for more details. 

We have over a decade of property experience and proven results for our clients. Property prices can rise and fall, and you should always consider both price rises and falls before making any purchase.