This emerged from research by broker forum, Cherry. Digging a little deeper, the survey revealed that 28 per cent of landlord clients are planning to sell properties, while 39 per cent of buy-to-let investors say they will increase rents. Just over a quarter of landlords plan to make no changes to their investment in the current climate and only three per cent intend to buy more properties.
Now this got me thinking – 28 per cent is a figure which represents a decent proportion of landlords and a decent proportion of properties which could, potentially, be coming onto the market. So, who is likely to purchase these properties?
Will larger portfolio landlords take advantage of some house price stagnation to bolster existing portfolios? Or will this result in a fresh wave of first-time buyers entering the market?
First-time buyer gain
This is not a straightforward question to answer but for first-time buyers in particular, many challenges remain evident and this is apparent in the wake of recent growth in house prices. Acadata data from E.surv recently revealed that, despite rising mortgage rates, house prices continued to climb in October.
The annual growth rate in the average house price for England and Wales in October was reported to be 8.8 per cent. However, on an annual basis, it is 1.2 per cent below the rate of 10 per cent seen in September and 3.5 per cent below the 12.3 per cent recorded in August. In addition, the monthly growth rate in the average house price in October was 0.8 per cent – a decline of 0.2 per cent from the rate seen in September and a 0.4 per cent decline from August.
Meanwhile, the annual rates of price growth in all 10 regions across England and Wales have reduced from the previous month. In East England, price growth has slowed in the month by some 4.0 per cent from 15.4 per cent to 11.4 per cent, and in East and West Midlands has diminished by 3.6 per cent and 3.7 per cent respectively.
While house prices remain high, there is some reassurance for potential buyers that the runaway house price train is slowing in line with recent economic pressure. Having said that, we can’t ignore that affordability and the raising of deposits remain obvious obstacles for many borrowers, especially in the light of rising living costs and the highest mortgage rates seen for quite some time.
More homes but fewer borrowing options
Unfortunately, this means that some first-time buyers are being forced to remain on the property sidelines, while others who may have been on the cusp of purchasing are having to re-examine their finances to re-evaluate if they can afford to take the plunge or not.
As a mutual, it’s important to support a range of borrowing needs when and where we can, especially through these more turbulent times. This is particularly apparent for first-time buyers at the higher loan to value (LTV) bands after a sharp, but entirely understandable, contraction of the mortgage market.
This represents an important LTV band – although it’s also prudent to point out that lenders are currently having to maintain a tough balancing act from a funding, pricing, risk and service perspective.
However, with some much needed stability returning to the lending market, let’s hope that lenders continue to push the 95 per cent LTV envelope – provided responsible lending boundaries remain intact – to enable more first-time buyers to snap up those properties which some landlords may be looking to offload.
