Is 2023 a Good Year to Invest in Property?
Is 2023 a good year to invest in property? With the average UK house prices in a state of flux since last year many have been asking this question. Without making you wait for the answer, in short, in our opinion, yes! Though there are caveats, and these will be based on what your investment goals and requirements are.
Over the past 12 months we have seen interest rates increase quite dramatically, and in certain areas capital value increases are slowing, with predictions stating a decline over the course of 2023, in fact one headline I read recently was stating that a collapse of the UK property market could be coming soon. If we look at the Bank Of Englands UK House Price Index for December 2023, it shows that on average house prices fell 0.4% since November 2022, but consider that it also shows an annual price rise of 9.8%. The rental sector has seen rents increasing substantially, and due to a lack of available properties for tenants, the demand for rental property has risen dramatically. So, we are now seeing a slow down of the property prices, and in some areas a decline, high demand for rental property and increased rents, some media outlets are claiming the perfect storm for a bust, to me, this all looks favourable for the investor looking for a long term strategy.
Below we look at the main reasons why we think you should consider investing in property throughout 2023.
In June 2022 the Government published its white paper, which included proposals on all new tenancies requiring a minimum ‘C’ EPC rating, titled ‘A Fairer Private Rented Sector’, last updated in August 2022. The plan also made mention to the abolishment of the Section 21 notice, and plans for a new property portal to help landlords understand their obligations. Watching out for these white papers & upcoming legislation changes are invaluable to the investor. It provides you the chance to ensure you buy a property that is already compliant with any proposed changes. Keeping in contact with a company such as ourselves will give you the best possible chance to keep up to date with the current and future legislation information, and one reason why we host our popular monthly webinar series, Pulse On Property. In fact our up coming webinar, POP ep.7 will delve into investment hotspots, what makes a good area to invest, and to understand when you have missed the boat!
The next thing to consider currently is the slowing down of the property sellers market, which provides the savvy investor the chance to find a great investment or bargain. As values and growth slows down it presents opportunities for buyers to negotiate and present ‘below market value’ offers, with many sellers accepting for the sake of a quick sale. This can be due to numerous reasons but with the increase in mortgage rates, or the multitude of personal issues from divorce to relocation, there are always sellers looking to complete quickly and will consider time over price. Searching out these below market deals then gives equity and higher NET yields.
The above ties in with our next reason why 2023 is a good time to buy, with many landlords exiting the sector and selling their properties and portfolios, some due to the legislation changes and some due to change in personal circumstances. Either way look out for these ‘turnkey’ investments, some will be tenanted and ready to go, and make for a great investment.
We discussed earlier about the lack of stock in the rental sector, and rising rents. These factors are ideal conditions for investors to take advantage of the ‘right’ conditions to achieve a good return, especially as there are reports of some tenants happy to pay extra to ensure they secure the right home in the right place. An article popped up in my feed the other day from a potential tenant claiming having to wait in queues when viewing studio apartments in London, coupled with bidding wars and poorly presented properties. It is a landlords dream out there for those providing good quality accommodation at a fair price. But as the old adage goes, ‘location, location, location’ is more important now than ever and you still need to research and do your due diligence on a property and the area to make sure there is supply and demand to suit your strategy, whether its short or long term rentals. Talk to experts about ‘inside’ information, the best areas, where tenant demand is currently high, where are the saturation points, and the areas to avoid.
The other thing to discuss for 2023 and the current market conditions is the ‘cost of living’ crisis, and how many people are looking more and more into ways of saving money and budgeting. This coupled with the media attention on global warming, trying to slow climate change, electric cars, and other eco-friendly initiatives, then more tenants are looking for energy efficient homes. Properties that require little to power, heat and keep warm, will attract higher rents and more interest.
Finally if we consider some of the current stats as reported by the UK Property Market Stats Show* & Property Industry Eye, then nationally we are seeing the number of sales falling through decreasing, and currently at the lowest rate in 7 years, Scotland & Wales are both showing strong numbers in both sales and listings, with close to same average for 2017 – 2019 to the same time/date, and although faltering in recent weeks the North East of England started 2023 very strong in terms of residential property sales.
So don’t be nervous, and don’t buy into the doom and gloom, a ‘Crash is Imminent’ news, there is lots of potential out there, especially when we look at the Average Annual Price Growth in 2022 as reported by the BoE:
England 10.3%
Wales 10.3%
Northern Ireland 10.2%
Scotland 5.7%
England
East Midlands 12.3%
London 6.7%
Take into consideration as well that the UK supply is still well below the national demand, meaning that even if we experience pockets of decreasing prices, the market, as always, is strong enough to deal with these states of flux. For those looking to invest, it is important you speak to experts, and never over extend your budget, but for those investors with savings, willing to learn, take chances, and understand that the time is right, there are fantastic deals, opportunities and options.
If you have thoughts, comments or questions on the above or indeed about investing in property please contact our advisory team of experts below for free advice, and a wealth of experience