March 19

What can buy-to-let investors expect from rental prices and property values in 2019?

Unwrapping the equation of uncertainty, demand and supply

What all property investors would love to know is what the next 12 months promises for them. This year, with the global economy slipping and Brexit uncertainty bouncing across every front page, it’s harder to predict than most years.
In this article, we take a look at what the future may hold. No, we don’t have a crystal ball – but we do have the benefit of decades of experience and a couple of industry reports to draw on. Let’s start with rental prices.

The 2019 outlook for rental prices in the UK

When considering rental prices, just like property values, much depends on supply and demand. We’ve witnessed demand growing for quality properties. Consequently, at this end of the market, we’re seeing void periods shortening as more tenants chase properties available.
With the raft of regulatory and tax changes that have taken place over recent years, and the further restriction on tax relief on mortgage interest payments taking effect over the next 12 to 24 months, our expectation is that some investors and landlords will be hesitant to expand existing portfolios or enter the market.
We have suspected for some time that rental demand will grow faster than supply, and recent research has shown this to be true. Quarterly research form Reapit and Dataloft show that viewings in the third quarter were up by 13%, and new leases rose by 3.5%. Meanwhile, supply contracted by 6.5%.
Our forecast is that rents will continue to rise this year, though rises may not be uniform. Quality properties are likely to see the biggest increases in rental prices, while smaller, older properties are likely to suffer less from an imbalance of supply and demand.
In its Private Rented Sector (PRS) Report, ARLA found that 65% of letting agents feel that prices will rise, while more than three quarters think that the number of buy-to-let landlords in the PRS will fall as rising costs deter investment. We think that savvy buy-to-let investors will take action to reduce costs and the negative effect of tax changes.

The 2019 outlook for property values in the UK

We’re sure that you have seen, heard or read the doomsday scenario forecasts from the Bank of England, predicting that house prices will fall by 30% in the event of a no-deal Brexit. You may recall similarly apocalyptic projections before the EU referendum, based upon a vote to leave. Those pre-vote predictions have proved to be wildly wide of the mark, and we don’t expect any fall in the market to be anywhere near 30%. If prices did fall that far, our recommendation would be to ‘buy, buy, buy!’
However, property price movements have continued to play out on a regional basis. While London prices have been subdued, and fallen in some boroughs over the last couple of years, other regions that were left behind in the recovery from the GFC have performed much better.
As a generalisation, property prices have stagnated or declined in London and the South East, while prices in the Midlands and the North have continued to improve. Brexit uncertainty may hold transaction levels down, and this will keep a lid on the upside. This could create a buyer’s market, with some exceptional value for long-term investment potential to be found.
Therefore, our property price predictions for the UK is a broad -5% to +5% for 2019.
In its latest Housing Market Report, NAEA Propertymark learned that 43% of estate agents expect property prices to fall. Almost half of the estate agents think a no-deal Brexit will be negative for property prices.

In summary

Supply and demand will be the ultimate decider of rental and property prices in 2019. Brexit is like a thick fog that we must steer through, and no one really knows what the outcome will be. Uncertainty is likely to remain in the three to six months after the UK leaves the EU (if it does), but as this uncertainty ebbs away, the property market is likely to recover.
Investors and buy-to-let landlords are likely to be somewhat protected by rising rental prices, and the period of uncertainty could create some very attractive buying opportunities for serious long-term investors.
To keep abreast of the latest property market news, views and opinions, and to discover the advantages of effortless property management, contact one of our team today at  +44 0 1522 503 717
Live with passion,
Brett Alegre-Wood


Buy-to-Let Investors, Property Price Forecasts, rental forecasts

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