Investment chance for landlords as sellers slash aski...

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03 July 2023

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Investment chance for landlords as sellers slash asking prices

A prominent buying agent says nervous buyers are pre-emptively slashing asking prices before the housing market worsens.

If true, this could present opportunities for landlords seeking to expand portfolios at lower-than-expected prices.

Jonathan Hopper, chief executive of Garrington Property Finders, says: “With rapidly rising interest rates thinning the number of determined buyers, those who remain are finding that the market is tilting ever further in their favour.

“We’re starting to see a shift in pricing behaviour. As the summer slowdown approaches, some pragmatic sellers are recalibrating their aspirations by cutting prices pre-emptively to get ahead of the market, rather than slicing off thousands in response to a low offer.

“In some areas double-digit price reductions are now not uncommon, with regions that saw the frothiest excesses during the boom, as well as those with high levels of Help to Buy ownership, seeing some of the sharpest price falls.

“For many sellers this will be a bitter pill to swallow, albeit one that is preferable to the limbo of having their home sit unsold for months before they cut the price anyway.”

Hopper’s comments come on the back of the latest Nationwide index which shows that although prices remained broadly flat over the past month, they are now on average down 3.5 per cent over the past 12 months.

All regions except Northern Ireland recorded annual price falls in Q2 and East Anglia was the weakest performing region with prices down 4.7 per cent year-on-year.

Robert Gardner, Nationwide's chief economist, says: “Longer term interest rates, which underpin mortgage pricing, have increased sharply in recent months, in response to data indicating that underlying inflation in the UK economy is not moderating as fast as expected. This has prompted investors to expect the Bank of England to increase its policy rate further and for it to remain higher for longer.

“Longer term borrowing costs have risen to levels similar to those prevailing in the wake of the mini-Budget last year, but this has yet to have the same negative impact on sentiment. For example, the number of mortgage applications has not yet declined and indicators of consumer confidence have continued to improve, though they remain below long run averages.

“The sharp increase in borrowing costs is likely to exert a significant drag on housing market activity in the near term. For example, for a representative first-time buyer earning the average wage and buying the typical property with a 20 per cent deposit, mortgage payments as a share of take-home pay are now well above the long-run average.

“Moreover, house prices remain high relative to earnings, and as a result, deposit requirements are still a significant barrier for those looking to enter the market. A 10 per cent deposit on a typical first-time buyer home is equal to around 55 per cent of gross annual income – this is down from the all-time highs of 59 per cent prevailing in late 2022, but still marginally above the levels prevailing before the financial crisis struck in 2007/8.

“[And] despite the higher interest rates available to savers, the sharp rise in rents, together with continued high rates of inflation more generally is continuing to make it difficult for many prospective buyers to save for a deposit.

“Nevertheless, a relatively soft landing is still possible, providing the broader economy performs as we (and most other forecasters) expect. Labour market conditions are expected to remain relatively robust, with the unemployment rate remaining below five per cent, while income growth is projected to remain solid.

“With Bank Rate likely to peak in the quarters ahead, longer term interest rates should also start to fall back. As a result, a combination of healthy rates of income growth and modest price declines should improve affordability over time, especially if mortgage rates moderate.”

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- Michael Foley
- 03 July 2023 06:52 AM
Very good Investment chance for buyers as prices drop ?.
Your other article here today where you surveyed landlords who thought prices would go up 5%. Blind leading the Blind.

- Jo Westlake
- 03 July 2023 07:23 AM
Very sad this is affecting the Help to Buy young home buyers the most. These were mainly naive young people coerced into buying something way more expensive than they could normally afford. I certainly had tenants who bought a £325000 4 bedroom new build as their starter home instead of the traditional FTB property at less than £200000. It's fine until their mortgage fix ends and they have to start paying interest on the 20% government slice. At that point will they be able to make the huge higher mortgage payments? Paying sky high mortgage rates on £300K is going to be far more painful than paying it on £150K. Will they be repossessed? Will they spend years in negative equity, unable to move if offered job promotions elsewhere? Pretty much like the 1990s.
Sunak deliberately over heated the property market with his completely unnecessary Stamp Duty holiday and then overheated it even more by extending that Stamp Duty holiday. His totally inept actions are going to cause years of misery for countless homeowners.
Worried Landlord

03 July 2023 08:51 AM
To be honest I have found it annoying to see 3 bed houses being sold as FTB properties. I thought well whose buying 1 and 2 bed houses and flats? Other than landlords. When I was FTB it was a studio flat.
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- Simon Logan
- 03 July 2023 08:36 AM
I see this the other way…. Sell now before prices drop further and Labour increase CGT 🆘🆘🆘

- Jane Little
- 03 July 2023 08:40 AM
Exactly what I thought, those poor H2B people who were once so excited at starting off on the property ladder, will face the real threat of " having the ladder pulled" from.under them and now facing huge stresses as they struggle to try to get through this awful time.