Rental markets and property price line graph with plastic models and coins

How are property price and rental markets performing against forecasts?

Kate Faulkner looks at what is likely to happen to property prices and rent within the UK for 2015.

By Kate Faulkner, Managing Director at Designs on Property in For Landlords.

Line graph with plastic models and coins

It would be great if we could feel confident about what is likely to happen to property prices and rents. However, the performance is so tied into the economy, wages and local market variations, they’re not easy to predict.

Market predictions for 2015

There are many forecasts for what is likely to happen to property prices, but fewer when it comes to changes in rents.

Price predictions across the UK varied from zero growth – Savills predicting London prices would stall this year - through to a 7.3% increase for London from Chesterton Humberts.

Considering we are only half way through into the year, the predictions so far, bar London, haven’t been too bad. Price growth in the likes of Wales, Yorkshire and Humber, North West and East has been between 2% and 3% in the main, according to the government’s Land Registry figures, although Nationwide have reported much higher growth in the North East of 4.7% versus predictions of 1-3%.

Property Price Forecasts Savills

Chesterton Humberts

Knight Frank

Actual LR Mar 15

Actual Nationwide Q1 15

UK 2.00% N/A 3.50% N/A 5.9%
England & Wales N/A 5.60% N/A 5.3% N/A
London 0.00% 7.30% 3.50% 11.3% 12.7%
South East 3.00% 4.70% 5.00% 10.1% 8.4%
South West 2.50% 4.00% 4.00% 3.8% 5.7%
East of England 3.00% 4.20% 4.50% 8.4% 7.8%
East Midlands 2.00% 3.90% 3.50% 4.2% 5.9%
West Midlands 2.00% 3.60% 3.50& 2.8% 4.7%
North East 1.00% 3.10% 3.00% -2.9% 4.7%
North West 1.00% 3.50% 3.00% 2.2% 2.0%
Yorks & Humber 1.50% 3.60% 3.00% 3.3% 1.3%
Wales 1.50% N/A 3.00% 2.7% -0.5%
Scotland 3.50% N/A 3.50% N/A 1.3%

In the main, it appears the forecasters have been conservative, given the actual figures that have been revealed so far, but we still have the rest of the year to go. And although we are still seeing year-on-year growth in most areas (exceptions being the North East and Wales), most statistics are showing that these increases are slowing.

It should also be noted that since the Credit Crunch, we have often seen prices rise in the first half of the year and then slow, sometimes even coming back to down to the start of the year level.

From a rental perspective, it’s more difficult to gauge what’s likely to happen, as few are brave enough to make any predictions! Savills have their suggestions and I produce the data for Belvoir Lettings by region, so here are their forecasts:

Rental Forcasts 2015

Savills
2015

Actuals Q1 15
From April Update

UK 3.50% N/A
London 5% 5-7%
Uk excluding London 2% N/A
Belvoir    
UK 1% N/A
England 1-2% N/A
Wales 0-1% -1%-1.4%
Scotland 0% 3%
London 3% 5-7%
South East 1.50% 2-5%
South West 1.50% -1.5%-3.7%
East Anglia 2% 1-10%
West Midlands 2% -2%-5%
East Midlands 2% 0.5-3%
North West 0% 1.5-2%
Yorkshire 0% 1-5%
North East 0% -1%

Savills appear to be spot on with London’s forecast of a 5% uplift, and actuals from leading agents such as Your Move, Reeds Rains, Belvoir Lettings and Countrywide, appear to agree.

The regional forecasts I do for Belvoir Lettings are based on two key factors: historic rent movements back as far as March 2008 and changes in income, which is one of the main influencers of rent levels. Wages were forecast to grow in the UK by around 2% in 2015.

So far, the forecasts look a little low but, as with capital values, we often see a rise in the first half of the year and then a fall to the end of the year – so we will have to wait and see!

Why is it important to monitor property prices and rental performance?

Whether you are a landlord with one or lots of properties, it’s important to understand that you are running a business and will need to make decisions each year that affect your rental returns and the amount of money you earn.

Some of the questions landlords often ask me are: Should I put up my rents to existing tenants this year? I am thinking about buying another property – what do you think? Is this a good time to buy – or to sell?

Before I can answer them, I need to know what’s happening in the market now and what’s predicted to happen. For example, if I know prices are showing signs of falling and that’s what’s predicted as well, now might be the time to sell; if I know the opposite is likely to happen, renting it out for another six months or so could mean the property then selling for thousands of pounds more.

Alternatively, if you’re looking at releasing equity from your own home or an investment property, market data should enable you to work out how long it will take for your property to increase in value to a level that allows you to release the funds you need, while leaving a safe amount of equity.

For more information about property prices and rents and their impact on your investment, visit Direct Line’s Landlord Knowledge Centre.

Landlord Insurance Kate Faulkner Blog
Kate Faulkner

Kate Faulkner
Last Updated: 06 Aug 2015