Propertymark predict 2018 will be a year of change

This article was first published in Property Investor Today, and is republished in the Blog with our own comments added:

NAEA Propertymark and ARLA Propertymark have shared their forecasts for the rental and buying market in 2018, with rental prices set to rise in the 12 months ahead.

According to 59% of ARLA Propertymark letting agents, rent prices will increase next year, while 19% believe they will decrease. Some 62% predict the supply of rental stock will fall in 2018, while 53% think demand will rise. Meanwhile, seven in 10 letting agents expect private rented taxes to rise further in 2018.

Blog comment:  I am entirely aligned with these findings.  There should be no doubt about landlord tax costs rising given that Mortgage interest relief tapers-off further from April 2018.

“2017 was a big year for the lettings industry, and tenants felt the effects of this,” David Cox, chief executive of ARLA Propertymark, commented.

“Unfortunately, it looks like rising rent costs are going to continue into the New Year as agents need to be moving into a 0% fee business model by October, which will push rents up as the costs are passed through landlords and onto tenants.”

Blog comment: ARLA is advising its members that the tenant fee ban will be introduced from October 2018.  Whilst there is no firm date provided by Government, this is our current working assumption.  This will immediately impact the Oxford student lettings market for the 2019/20 academic year.

Cox believes the regulations making their way through Parliament next year will have a positive effect on the rental market, including the prospect of housing courts and longer-term tenancies.”

He said: “While these policies will be developed rather than implemented, they should start to affect the market as agents adapt their business in anticipation.”

Blog comment: I believe the new legislation will prove disruptive for at least 6 months as the market gets to grips with the ban on tenant fees.  Once a date for implementation of the ban is confirmed, tenants will seek to delay their decisions until as late as possible in the hope they can avoid paying a fee.  There is no clear market-wide consistent response to the fee ban emerging, suggesting that the market will adopt different approaches, causing uncertainty for tenants and landlords.

“Overall, the industry is going through a seismic change and the lettings market we know today will be radically altered over the next five years,” warns Cox. “This change will be painful for agents, but we firmly believe that the industry will come out of the other end stronger, more professional and with a robust reputation among consumers.”

Blog comment:  Any letting agent which is not actively planning for the ban now, is in danger of financial instability.  In my own agency we have been preparing now for well over 12 months.

By contrast, 43% of NAEA Propertymark’s estate agents predict that house prices will fall next year. The majority (44%) expect supply to remain the same in 2018, while 29% think it will decrease. Some 32% think demand will decrease in line with this, but almost half (46%) expect it to remain the same.

Blog comment: Prices in Oxford remained robust in 2017 rising around 6% despite transaction volumes falling around 17% YoY.  I expect Oxford prices to perform well relative the wider SE market and remain in positive territory.

Meanwhile, a third (34%) expect incidences of gazumping to decrease in the New Year, while the trend of renovating rather than moving is expected to continue as 60% think more homeowners will do this.  “However,” he continued, “looking ahead to next year, more than half of our members don’t think the first-time buyer tax relief will have a real impact on the number of sales being made to the group.

Hayward added: “Agents expect supply to remain the same but demand to grow which sounds like bad news, but if we can improve the process of buying a property, we’ll be making vast improvements to the sector which will ultimately make it easier and provide more certainty for first-time buyers.”

The trade body also has high hopes as well as predictions. “Our members want to see stamp duty relief rolled out nationally to all buyers, and hold out hope that housing stock will increase,” said Hayward.

“This will be a case of ‘wait and see’ – the Government has made many such promises in the past which we’ve never seen translated into reality.

Blog comment:  Predictions on the future property market always seem to be pessimistic, partly because that seems to sell more copy, and partly because there is so much Government intervention it is hard to predict the fall-out.  The fundamentals in Oxford are strong.  There is an under-supply of new build property, and under-supply of affordable starter homes, and an under-supply of private rented accommodation.  Under-supply can create stagnation particularly when 2nd time buyers can't afford to move, and 1st time buyers can't find or afford a starter home.  But, where demand stays strong, prices tend to hold-up well.  Despite far lower sales transactions in 2017, prices rose 6%.  Lon-term new supply of starter and small family homes is desperately needed to increase sales volumes and lubricate the market.