The Residential Expert - January 2023
For our first Residential Expert discussion of the year, we look at what the next 12 months might bring for the property sector, deposit-free homes, and the state of interest rates. So what does ex-Propertymark CEO Mark Hayward have to say? Find out the summary in our latest post.
It’s time for our first Residential Expert discussion of the year. What will the next 12 months bring for the property sector? We sit down with former Propertymark CEO and Just Move In Ambassador, Mark Hayward, to discuss the hot topics likely to dominate discourse in 2023. There’s nothing like a fireside chat to thaw the big freeze outside.
JMI: Greetings, Mark. The New Year is always time for predictions so we’d like to hear yours. Let’s start with house prices. Do you think they’ll go down a lot, a little, or not at all?
Mark: I think we’re going to see a slowing of the market with prices readjusting.
However, after all the doom and gloom of two months ago, the latest economic figures say that we’re not technically in a recession after all. Things might therefore end up better than expected. So yes, there might be a slight downturn, but I don’t think we’re going to have a ‘crash’ unless something very unexpected occurs.
When it comes to rentals, I’m hopeful that rent increases are finally starting to slow. I think this is due to affordability and the high price of energy. We’re also seeing that tenants don’t like moving at the moment - they’d rather stay where they are - so there’s a lid on supply.
Landlords will also come under siege this year due to tax rises and potential legislation changes. This isn’t great news because they were already suffering due to tight margins, uncertainty, and higher interest rates. Sadly, there’s very little incentive to become a landlord at the moment; therefore their numbers will probably dip this year.
JMI: Interest rate rises were obviously one of the big stories of last year. How much higher do you think they’ll get?
It’s difficult to tell. There’s bound to be a further rise in the base rate. I imagine that we’ll see the rate peak in late spring or early summer. The problem, however, is that I don’t think interest rates are going to come down very quickly afterwards - at least not to levels we’ve become accustomed to over the last few years.
Much will depend on the battle with inflation. It’s expected to drop, at least slightly, as combatting inflation is currently the government’s number one priority. However, it’s got to drop by quite a lot because we’re currently over 10%.
JMI: Do you think that we’ll finally see the Renters Reform Bill become legislation in 2023?
The government keep saying that they’re working on this. But they haven’t actually given any firm timings. And we don’t know how many people are working towards it. Basically, therefore, we’re still getting the same message that we were nine months ago. They’ll need to get a move on because we’ll have a general election next year.
Just talking about the election, by the way, I’m not optimistic that we’ll see any sweeteners for the property sector in the run up to polling day. I certainly don’t foresee something like another stamp duty holiday. We might see something but I’m not holding out too much hope.
JMI: We didn’t get a chance to talk about the demise of Boomin last year. Will any new portal ever successfully challenge Rightmove as the nation’s No.1?
Well, Boomin not only had money behind it; the site’s offering was also attractive to agents. But how much were these agents actually paying? It’s easy for big start-ups to haemorrhage money.
As for Rightmove, they’ve seen off plenty of challenges over the last ten years or so. Their model works because it’s free for the public. Therefore, the public absolutely loves it. But it’s expensive for agents who feel, because of Rightmove’s dominance, that they have no choice but to use it.
Boomin’s offering was about data, so it wasn’t quite the same, but they had the best run at challenging Rightmove than anyone before them. However, the venture still came up short - and this creates a problem for new kids on the block. Potential investors might think, “if Boomin can’t succeed then who can?” It’s very hard to get impetus.
JMI: Have you heard about ‘deposit free homes’ where buyers don’t pay a lump sum upfront? Instead they make monthly contributions towards a deposit after which they start paying a regular mortgage.
Anything that helps first time buyers to get on the property ladder, especially after the end of Help To Buy, must be a good thing. It sounds a bit like rent-to-buy though. And I wonder how lenders will view it? Buyers will presumably need a mortgage offer in place before they go through with the purchase. And mortgage offers are usually only valid for 6 months max.
However, I can certainly see why developers are thinking outside the box. Reservations have dropped by almost a third, which isn’t good news, and with interest rates and rents going up, it’s becoming harder and harder to save up for a deposit.
Renters frequently pay 40% of their wages on rent so it’s very difficult to rent and save simultaneously. I don’t think we’re going to see mass repossessions and a housing crash, with lots of new properties suddenly coming to market, so perhaps we’ll see more initiatives like this to help buyers make their first purchase?
JMI: Older generations often use equity release, which has become incredibly popular in recent times, to help their kids with a deposit. But what long-term impact will equity release have on the sector?
If it can help first time buyers, at least in the short term, then that’s good. The problem, however, is that equity release means that more people will stay in their home for longer. That’s the whole point. Therefore, I have mixed feelings.
Tens of thousands of households take advantage of equity release every year, so that’s a large number of properties that now won’t come to market (that otherwise would have done). Therefore, a lot of ‘last time buyers’ won’t be buying because they won’t be selling.
This situation obviously isn’t good for the sector. There will be a lot of homes with bedrooms that aren’t being used - homes that are too big for the occupants - which isn’t what you want when there’s a shortage of available homes.
The problem in our country, of course, is that everyone wants their own home and their own space; therefore we use equity release to stay put.
JMI: Talking of space do you think that the race for space, brought on by the pandemic, is now definitely over? Flats in urban centres certainly seem to be popular again.
The exodus from urban areas that we saw during the pandemic has definitely slowed considerably. Many people who moved to the suburbs or into the countryside are now being ordered back to the office. And some who initially fled to the country, but discovered that it wasn’t quite to their liking, are now moving back and buying city centre flats.
However, although the rush for space has slowed, things won’t go back to how they were before the pandemic exactly. Home working is here to stay and people might not commute every day anymore. Therefore, it’s not so important to live close to the office.
JMI: One advantage of smaller properties, of course, is that they have lower bills and council tax. Do you think that we might see some reform of council tax with an election coming up?
Council tax, as we know, goes up on a yearly basis and councils can increase it easily nowadays. But the system certainly has weaknesses. Properties were assigned to their various bands about 30 years ago. What’s more, you pay the same if you’re living in a one million pound house or a five million pound home. The system is so imperfect.
Consequently, it would be a hugely popular decision to take taxation away from property. But what do we replace it with? The things that council tax funds still need to be funded. And the government says that it won’t increase personal taxation.
Maybe this is something that Michael Gove could look at - although he’s already got a lot on his plate with the Renters Reform Bill. Therefore, I doubt we’ll see any reforms to council tax in the near future.
JMI: Yes, there’s certainly a lot for Mr Gove to deal with. Let’s see what he achieves in the next year. In fact, let’s look back at your predictions in 12 month’s time and see how close you were.
Mark: Well, these predictions should certainly be a lot more accurate than last year’s ones. 2022 threw up so many unexpected events. Let’s hope for a bit more stability this year.
JMI: Absolutely. Fingers crossed.
To watch the full video version of this episode, click the link below.
https://youtu.be/LlNZD9zaHH8