The land transaction tax holiday is over, furlough finished at the end
of September, unemployment is due to rise and inflation is rife … is this the
end of the post lockdown Neath property boom?
Surely, we are heading for house price correction?
Forecasting what will happen in the Neath property market this Autumn
may not be as simple as it first appears.
It’s true the Neath property market is
starting to settle down after an all-time number of property deals were
completed in June.
More Neath
people will have moved home in 2021 than in any year since 2007, with an
estimated 1.5 million home buyers nationally having bought a property.
Roll the
clock back to last Christmas, and the Government’s Office for Budget Responsibility, projected that national house
prices would drop between 6% and 8%.
By Christmas, the price of the average home in Neath will be about £156,100 up 10.1% on last Christmas.
Let us not
forget there were so many ambiguities at the start of 2021. We were about to
start a 5-month lockdown, hospitals were bursting at the seams with patients,
the vaccines hadn’t
started, 4 in 10 employers had furloughed their staff and we had just had
Brexit … things didn’t
look good.
Yet,
nothing could be further from the truth 10 months later – the Neath property
market has been on fire. But after a heated summer in the Neath property
market, things certainly can’t
carry on as they have been since the end of lockdown.
So, where
are we with the Neath property market as it stands? Taking reference from
historical data on the website The Advisory (I would certainly recommend you
check it out)…
66% of properties on the market today in Neath are sold subject to contract (stc).
How does
this compare to October 2019 and October 2017?
In October 2017, 34% of Neath properties were sold stc, whilst in October 2019, 42% of properties were sold stc.
Yet how
does that compare to the national picture?
In 2017,
39.72% of the country’s
properties for sale were sold stc whilst in 2019, that figure was 38.11%.
Now I love
a good league table, so then decided to compare our locality to the rest of the
country
So, I chose to look at the SA10
postcode specifically. For information, there are 2,234 postcode districts in
the country.
The 2021 sold stats put SA10 in at 1,127th place in the country, 1,436th in 2017 and 486th in 2019
… meaning we have improved from the 2017 figures.
As we enter
the last 3 months of the year, there are not so many uncertainties as there
were at the start of 2021. On the good news front, 49 million Brits have had at
least one jab (45m two jabs) and the UK will be the world’s fastest growing advanced economy this year according to the IMF.
Conversely,
the furlough scheme ended at the end of September and with energy prices going
through the roof, a real shortage of homes for sale (as I have discussed a
number of times in recent blogs) and rising inflation on the back of a shortage
of raw materials and trained staff, forecasting this and what will happen to Neath
house prices might not be as easy as it seems.
Post land transaction tax holiday, it is now recognised that the majority
of the demand for people moving home is focused by a profound unhappiness and
frustration with the homes we live in, revealed during the first lockdown in
2020.
Buyers (and
tenants – so take note Neath buy-to-let landlords) want space … in fact,
three types of space … and they will pay handsomely for them!
- Office space (be that bedroom or study)
- Outside space (gardens or proximity to green areas)
- Broadband with ‘outa-space’ download speeds
And whilst
there is a shortage of properties coming on to the market, demand and supply
economics mean…
Neath house prices should
remain relatively stable going into 2022.
The number of
properties coming onto the market in Neath is slowly improving, yet not enough
to diminish house values.
Also, don’t forget Neath first-time buyers still have land transaction tax relief
all to themselves again and mortgages are cheap. At the beginning of the 2020
lockdown (spring 2020), mortgage providers removed their higher risk 5% deposit
mortgages for fear of a housing market crash. Currently, the vast majority of
these low 5% deposit mortgages are back, together with the Governments own 5%
deposit mortgages.
Yet many Neath homeowners are concerned about inflation and its effect on their mortgage payments.
Inflation
is important because if inflation gets too high, the Bank of England will need
to raise interest rates to reduce inflation. Because mortgages payments are
based on the bank of England interest rate, higher mortgage payments will
affect what people can afford. Normally the higher the mortgage rate, the less
likely house prices are to increase (and in fact if interest rates are too
high, house prices will fall).
Whilst I
can’t give you advice, with the
Bank of England base rate at a 300-year historic low of 0.1%, I’m still surprised that nearly 3 in 10 Neath
homeowners with mortgages are not on a fixed rate mortgage. There has never
been a better time to get a fixed rate mortgage, as there are deals out there
with interest rates as low as 1%. This means even if interest rates do go up in
the short term, you will be protected from higher mortgage costs. Anyway, back
to inflation.
Inflation did rise quite quickly and steeply in 2008/9 but came back down within a year.
This was
because of a shortage of staff and raw materials during the Credit Crunch of
2008/9, the very same issues we’re experiencing at the moment in Q4 2021. The
type of inflation (yes, there are types of inflation!) in 2008/9 was called ‘push inflation’. Whilst inflation is not great, ‘push inflation’ could be described the better type of inflation
(as long as is it doesn’t
go on for too long).
The
economic crippling hyper-inflation seen in the 1970s was ‘pull inflation’. The circumstances that create ‘pull inflation’ are not being experienced at the moment in the UK.
This is good news because ‘pull
inflation’ is bad inflation, which in turn would create massive problems to the
UK economy as a whole.
Therefore,
whilst inflation will probably rise to 4-5% by Christmas, I don’t believe the Bank of England will raise
interest rates substantially as the message we are hearing from them is they
see this as a short-term blip.
Opportunities for Neath
buy-to-let landlords?
Ultra-low
mortgage rates and a booming rental market is encouraging more Neath buy-to-let
landlords to expand their rental portfolios, yet their strategy is changing.
Yields are increasing as there is a shortage of rental properties, driving up
rents. Also, there are Neath landlords looking to exit the rental market, often
because they want to liquidate their portfolio for retirement. These portfolios
don’t make it onto Rightmove and
get sold ‘off
market’.
Therefore,
if you are a serious Neath buy-to-let landlord and you’re looking to expand your own portfolio, it’s really important to put yourselves on the mailing list of estate
agents and also build up great one-to-one relationships with the same agents to
ensure that you’re
at the front of the queue for these off market rental portfolios and not at the
back.
To conclude, nobody knows the answer to what will happen to the property market in Neath as we go into 2022. There are many factors that could affect the market in a positive and negative way, yet buying property is always a long-term investment (be it for yourself or to rent).
So if you need any advice on what you should do, feel free to get in touch with one of our local property experts today.
