Record residential investment year

New figures show UK residential investment volumes exceeded £6 billion in 2020. This matches the all-time high recorded in 2018 and has been driven by a heavy reliance on the PRS.;
PRS

Colliers, Canadian-based professional services, has released new figures that show UK residential investment volumes exceeded £6 billion in 2020. This matches the all-time high recorded in 2018.

Stunted earnings drive reliance on PRS

From the data we can see that house prices across the UK are on the rise, unfortunately, due to the pandemic, earnings have taken a hit.

With entire sectors like hospitality still unable to open, workers still relying on the furlough scheme from the government and significant numbers of pandemic-driven redundancies, buying a house is simply not an option for a great many people.

As such, the private rental sector is desperately needed to house affected.

This difficulty to get onto the first step of the housing market has long been the case, due to the divergence between the cost of housing and personal income growth. It has simply been worsened by the pandemic.

Demand driving up rental values

Increased demand is placing pressure on property prices and driving up rental values across the country.

The pandemic has widened the gap between those who can afford to buy their own homes, meaning many will be relying on the rental sector for longer than initially planned.

The Royal Institution of Chartered Surveyors, (RICS) said new buyer enquiries remained negative, but by less than in January.

Economists reiterate the view that housing affordability will not become more accessible until house building increases, and this is the key factor – not landlords buying up property – as to why FTBs can’t get on the property ladder.

Simon Rubinsohn, RICS chief economist commented on the SDLT holiday extension:

“[The measures] should help support the housing market over the coming months with concerns around a cliff-edge end to the stamp duty break eased.”

“However, a very clear message emanating from the latest survey is that more needs to be done to address the shortfall in supply with price and rent expectations very evidently continuing to accelerate.”

Act immediately to secure property with a lower tax bill

The gap in housing affordability, exacerbated by loss of earnings as a result of the impact of Covid-19, leaves a heavy demand on the PRS.

This offers landlords significant opportunity to invest, with strong assurances of demand for their properties in the years ahead.

With the recent announcement of the stamp duty holiday extension, there is an obvious benefit in investing in the residential market now.

Landlords are urged to act immediately to take advantage of this opportunity, as conveyancers were under immense pressure leading up to the last deadline, which caused delays and headaches for all involved.

Oliver Kolodseike, deputy chief economist at Colliers, commented

“It’s no surprise that the stamp duty holiday has resulted in a rush in home buying as the upfront costs become more obtainable. With affordability ratios continuing to deteriorate as house price growth outperforms earnings growth, house buying is as difficult as ever, particularly in the south east, and any support brought in by the government is welcomed.”

“The extension of the stamp duty holiday, albeit with staggered increases, until October is likely to mean that this level of activity will be sustained through most of 2021.”

“It is also helping the buy-to-let landlords to grow their portfolios again. The last time residential activity reached those kind of levels was before the additional 3% levy for second homes was introduced in April 2016.”

Andrew Turner, chief executive at Commercial Trust commented:

“Landlords have a strong opportunity to grasp here, as it is clear the PRS remains fundamental to housing the nation, and that demand is only going to continue to grow. “

“I urge anyone looking to invest, to take note of what happened leading to the original March deadline. The huge volume of people trying to get property investments completed in time resulted in enormous pressure on the industry.

“Do not wait if you are keen to invest, missing the completion deadline will be costly, so the sooner you get your purchase in motion, the better.”

This information should not be interpreted as financial advice. Mortgage and loan rates are subject to change.