Afternoon all and a Happy New Year to everyone out there. With the turn of the Year it is often a time when many people take stock and reassess their Circumstances. Therefore It seems appropriate to stand back and try to look at the BIG Picture. The Property Market in Bedford is Fluid and Constantly changing, but Some trends can be picked if you try to read between the Lines. Therefore, here are a Number of Predictions for the New Year
1. Rents in 2016 – The only way is up!
How much they will rise is difficult to say. The the Recent burdens placed on Landlords by George Osborne (stamp duty and mortgage interest relief changes) will see the supply of rental properties reduce as some Landlords exit the market (mainly those with high borrowing and the ‘Dabblers’). Another factor to Consider is the Introduction ‘Right to Rent’. This will place a further administrative burden and Cost on Landlords, failure to do so may result in a Fine of £3000. Combine these with increasing tenant demand and simple economics suggests that this will cause an increase in rents.
2. The Bank Base Rate – not much change In 2016
Okay, I’m no economist but there has been a bit of a economic recovery. Many households are now feeling that they are back to doing ‘OK’, and this has been based to some extent on the 0.5% base rate that has been enjoyed since 2009.
The Bank of England (BOE) meets monthly to discuss the Rate and whether to raise or lower it. The media love to speculate and have been saying for many of those years since that the Rate will rise soon, but the BOE never has. The fragility of the the UK Economy and its recovery, coupled with the Volatility in the World at large has meant the BOE is ‘Risk Averse’ Therefore I think its fairly safe to say that any change will be small if at all.
One thing for certain though is that the Media will over hype any rise (no surprise there then!)
3. MAD till MARCH, Post- Easter Blues
Now Investors, who invariably plan for the long term, shouldn’t be put off too much by the 3% Stamp Duty Rise on Buy To Let purchases from April. However, it would clearly make sense for those investors in a position to buy quickly to do so before 1st April and avoid the tax. Therefore this is going to lead to an increased sense of Urgency for the first 2-3 months. It will have the effect of Bringing Sales Forward and thus lead to the Slump in Month 4.
The introduction of the 3% Stamp Duty will only serve to drive up Rents Further. Interestingly though, George has left a legal loophole in the new rules, because when it comes to selling up, they can offset purchase costs against any eventual capital gains tax, including stamp duty
4. Working Tenants sort after, As Housing Benefit Is Cut back
It is anticipated that at best Housing Benefit rates will be frozen or at worst they could be cut in 2016. This will mean tenants will be forced to ‘top up’ a larger amount or run into arrears
Combine this with the additional pressures facing Landlords as a result of the phasing in of mortgage tax relief changes and it may be that Housing Benefit tenants become an increasingly less attractive option, especially where margins are tightest on single lets
5. Change of Focus – increase in HMO’s
The ‘Anti Landlord’ measures introduced are aimed at hitting single let Landlords in the pocket. However, every challenge creates an equal or greater opportunity, it may just need a change in approach or focus to generate significantly greater returns.
HMO’s are perceived as being exclusively for students or generally being of low quality. Many feel that they won’t work ‘in their area’ However, if priced and presented right, this strategy, aimed at working tenants, will work in most areas with the exception of the more rural Parts of the Country.
It still remains a relatively niche sector of the market but take a quick look on www.spareroom.co.uk, and it shows that there is demand for this sort of accommodation and would predict that it will become more popular in Bedford going forward.
To be Continued……