13th April 2018
The property market continues to remain very buoyant in north Leeds irrespective of the negativity of the press about the market in general. Again, there seems to be an emphasis on what’s happening in and around London with little regard for what’s happening regionally and locally. First time buyers are taking the potential for interest rates rises seriously, and trying to get on the ladder with a low, fixed-rate, mortgage before the bank base rate rises start to filter through to the mortgage market.
Second time buyers are seeing the current low interest rates as an opportunity to move upmarket. We’re seeing quite a few second time buyers not selling their first home to fund their second purchase, but converting it into a ‘pension pot’ by utilising the ‘Let-to-Buy’ mortgages that are available.
Investors are aware that the recent tax changes are going to cause them some financial pain, although many have not yet seen the final figures in their 2017/18 tax computations. No doubt a clearer picture will emerge over the next few weeks and months as everyone collates their tax return information. A number of our ‘reluctant landlords’ (those who had to let their property when the market collapsed post-2008 and they found themselves in negative equity) are now selling their investment properties. Many of these are being purchased by owner-occupiers and I forecast a shortage of rental properties in north Leeds in the next 12 months or so. As I cannot see any likely reduction in demand for rented accommodation rents are no doubt going to continue the upward trend we’ve been experiencing for the past couple of years. For the professional landlords and those with only one or two Buy-to-Lets, the increase in rental value will offset the changes in taxation, no doubt encouraging them to retain what properties they already have. Whether it will spur them into buying more Buy-to-Lets remains to be seen.
I was delighted to hear on Monday that Government has finally accepted that regulation and licencing of estate agents is needed (https://www.gov.uk/government/news/government-to-professionalise-the-estate-agent-market). I have been championing this for years, although it will no doubt take some years to come into force – I’m guessing with Brexit being the priority, the legislation for licensing of agents will be ‘kicked down the road’ for a year or two. The speculation is that with the downward pressure on fees (thanks to on-line estate agents) the need to become qualified will prove the ‘straw that broke the camel’s back’ for many agents and a considerable number of the country’s existing non-qualified estate agents will choose not to go down the qualification route, instead leaving the industry for something less stressful and less competitive – I’m told the recruitment market is more lucrative and easier than estate agency today; not sure the grass is really greener on the other side!
The thought of agent’s having to be qualified got me thinking further about the on-line estate agents. Will they be able to employ a sufficient number of ‘local agents’ who are qualified at the same fee level they are currently charging? None of the on-line agencies are making a profit as far as I can determine and unless they capture a significantly larger share of the market they will never go into profit – which in fact is what most traditional agents are expecting. Will estate agency fees have to rise as a consequence? If they do, that will be the opposite of what Government wants to see. Government were unhappy with the legal profession’s conveyancing fees charged by qualified solicitors, and introduced Licensed Conveyancers. The consequence was that conveyancing fees plummeted as Government predicted, but the by-product was an impersonal and inefficient service (mainly through conveyancing factories) except for the most straightforward of matters. With increased regulation and agents having to be qualified, the polar opposite is likely to occur in estate agency; a lower number of qualified agents across the UK demanding higher fees for their service. You only have to look at the fees charged in countries where estate agents are already licensed, such as America and Australia, where 2% -5% is not unusual.
We live in interesting times.