The Residential Expert - September 2022
After an enjoyed summer, our Residential Expert and industry guru Mark Hayward is back to help us navigate the latest property news on energy bills, interest rates, second homes, and more.
Well, it’s all change at 10 Downing Street. After breezing past Rishi Sunak in the Tory leadership ballot, Liz Truss has inherited an inbox that looks anything but a breeze. Fortunately, however, it’s all continuity here at Just Move In. So let’s turn to our regular Resident Expert and steady hand on the tiller, Mark Hayward, as we navigate all the latest property news…
Mark: In terms of the property sector, I hope we get some longevity when it comes to the new housing minister. The consultation period of the Renters Reform Bill is now over so we’ll see where that goes. Housing supply is another big issue as we’re still not building enough new homes. It’s not good that market uncertainty has wiped so much off the value of homebuilders’ stocks in recent times.
JMI: The new PM will certainly have her hands full. Where do you think we are generally in terms of the property market?
Mark: Sadly, it’s always boom and bust with the media. And predictions of doom aren’t helpful. My personal view is that although the ‘cooling’ I predicted is continuing, supply looks like it’s gradually starting to increase, which is promising. Of course, the market often slows down a bit as we head into winter, and the cost of living crisis and rising interest rates won’t help, but there’s no need to panic.
I’ve said this before but the market is always driven by sentiment: in other words, how do people feel? If they think a house will be worth less than it is now a year after they’ve bought it then they won’t pull the trigger. But overall, I don’t think we’re going to see a rapid decline or ‘crash’. Instead, we’ll see a period of ‘calm’.
What’s more, in terms of the rental sector, we’re still hearing reports of immense competition between tenants with properties going to best bids. The key will be when the cost of living crisis really begins to bite and people start to question how much they’re prepared to pay.
JMI: Interest rates will obviously play a big role in deciding where the market goes. How high will they need to get before we see a drop in prices?
Mark: Well, in the last two big property recessions we saw interest rates up at 15%. But they won’t need to go that high to have an impact. They only need to rise to a level where people think twice about moving.
Obviously, a lot of other factors go into this, too. Stamp duty and other things make the cost of moving expensive. But let’s not panic too much about interest rates and a possible crash now. I still think the most likely outcome is that we just have a quieter time.
JMI: How do you think the energy crisis, specifically, might affect the sector? For example, will we see more empty nesters finally downsizing because their bills are so high?
Mark: When it comes to empty nesters, a lot of them are asset-rich and cash poor so they’ll certainly be worried about their bills. But I don’t think they’ll necessarily sell up. Lots of them will simply release some equity to free up cash instead, especially if they’re happy living where they are.
In terms of the rental sector, a lot of tenants are already paying a premium rent so they’ll definitely be feeling the pressure. Therefore, I think we’ll see more people paying attention to ECPs when they move. And obviously this creates more pressure for landlords to upgrade their properties.
JMI: Yes, landlords already need to upgrade all their properties to grade C by 2025 (or 2028 for existing tenancies). Given that this will cost an average of £7,500 per home, it is still feasible in the current climate?
Mark: It’s a tough one because landlords won’t necessarily receive more rent to cover this extra expense. As to whether it’s fair or feasible, it basically comes down to a familiar dilemma: should we put the environment first or prioritise the economy and the amount of money in people’s pockets? Sadly, there are no easy answers.
JMI: Another problem facing the sector is that people are staying in their homes for longer and moving less. Why is that?
Mark: It’s a combination of factors really. Twenty years ago or more, a first-time buyer might only stay in their property for two years before moving onwards and upwards. But these days it costs a lot of money to move so it puts people off.
The reasons that people live where they live have changed somewhat, too. For example, these days you probably live somewhere simply because you like it, or because the local school is good and you want your children to stay there for a long time. Meanwhile, the baby boomers that are now retiring with final pensions don’t necessarily need to downsize anymore.
It’s also become fashionable to improve one’s current home (and extend) rather than move. People also know that it takes a long time to move because conveyancers are all booked up and deals take a long time to complete. So basically, moving just seems like too much of a hassle for some. Finally, people don’t need to move for work quite as much now because of remote working.
JMI: Today’s final topic is the impact second homes are having on communities in tourist spots. What are your thoughts on this?
Mark: It’s another tricky one. House prices are high in tourist destinations and rental stock in particular has been badly hit by the increasing number of short-term tenancies and Airbnb. Local people and local workers are therefore finding it harder to live locally.
The problem, of course, is that house price inflation in these spots, which is being fuelled by money from wealthier parts of the country, hasn’t been matched by wage inflation in these communities. Therefore, although this money is welcome in many ways, as tourism boosts the local economy, some communities could become like ghost towns during the winter.
JMI: Do you think the government might intervene to help the situation?
Mark: Unfortunately, there are probably more pressing concerns for Liz Truss to address right now. We might see some new regulations at a local council level - they’ve experimented in St Ives, for example, by preventing new build properties from being bought as second homes - but any such moves might just end up penalising landlords. And as we all know, landlords have had the rough end of the stick in recent times. Sadly, once again, there are no easy answers.
JMI: Yes, it’s safe to say that Liz Truss has a job on her hands. Thanks again for your time, Mark. Let’s reconvene in a month’s time.
Mark: Yes, let’s. See you in four weeks.
You can watch the full uncut episode here:
https://youtu.be/Stibu5jNzWk
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