Lights, Camera, Action.

Did you see our Managing Director, Sara Newson’s, appearance on the recent episode of Property Question Time? Together with hosts Stephen Galpin and John Reynolds of Titan Property, they talked about everything from the impact of green energy practices on the property market, to the recent trend towards HMO properties over buy-to-lets. You can  watch the episode on their YouTube channel here but here’s the rundown of the chat, plus some added extra thoughts…

Going Green
Adopting green practices as an investor is becoming more and more prevalent, the government have recently withdrawn the new requirements for rental properties to meet with a set EPC rating but we are pretty sure that something similar will return, it’s a matter of “when” not “if”.

However, environmentally friendly practices are a hot topic in the  property market at the moment. Especially amongst developers – solar panels, heat pumps, efficient insulation can make a property more attractive to buyers, but it comes at a cost. Whether or not buyers are prepared to pay the premium for greener properties remains to be seen.

New homes are one thing but when it comes to our existing housing stock the key challenges facing this growing trend are suitability and workmanship. Due to many factors such as size, layout, positioning and outside space many of the green offerings just wont work on the properties, and where there are options it’s hard to retrospectively install without
ruining the look or integrity of the building. On top of this, we have found that it’s not easy to secure high-quality workmen and contractors who have the skills and commitment to implement these green initiatives.

Navigating Mortgage Challenges
The Bank of England’s recent announcement to retain the Bank Rate at 5.25% and their supposed suggestion that we won’t see cheaper mortgage rates until around mid-2025. We saw the base rate announcement as positive, as did our buyers. We have seen mortgage rates decrease recently, with 2-year fixed rates coming in at 4.79% and 5-year rates at 4.99% for smaller C4 HMO’s. More and more investors are re-joining the market, with a lot of them seeking out higher cash-flow strategies but these latest base rate  announcements to hold the BOE rate has seen a positive stream of standard BTL investors returning and we expect this to continue now with each announcement, bringing a bit of buoyancy to the currently steady market.

However, our advice remains the same as it usually is: press on and be strategic! With a possible change in government later on this year, the market could change pretty rapidly. At the last change of government we saw new and updated policies expedited and rapidly implemented, and the incoming government tweaking those policies so it’s important to  stay aware of the market, while not becoming overly influenced by the flashing headlines of the media. If we do have a change of government we might have a period when it feels like the wild west with lots of notions floated that will never come to fruition so please do not get overly consumed by them, especially the ones that are ridiculous in terms of the scale of the requirement – they are unlikely to see the light of day!

The Shortage of HMOs
With investors seeking out higher cash-flow strategies, HMO’s is one of the go to strategies but article 4 has seen a halt in new HMO’s being created and as such we now have a shortage not only for tenants but for investors wishing to invest in them. The supply and demand has swung back the other way and in most areas we have a shortage of HMO’s.

York chose to adopt an Article 4 directive as soon as it became an option, but Hull didn’t follow suit. Hull’s approach saw the city adopt Article 4 in 2 stages, and there are some  parts of Hull where it doesn’t exist at all. We would implore you to tread carefully here and think logically, if there isn’t an article 4 directive in the area – should you be investing  in HMO’s in that area?

Licensing Challenges
A question highlighted the inconsistencies in HMO licence regulations across local authorities. We have found that some local authorities still operate with archaic regulations initially set by the national government, such as demanding a basin in each bedroom, abolished by the national government a long time ago. Certain councils insist on them even when the bedroom has an adjacent bathroom and the ratio of tenants to bathrooms is 2:1.

But, in our experience, if you give the local authority a good enough reason to overrule these regulations it’s likely that they’ll take a view on it and accept not installing one. This  can be a downfall for new investors who don’t have this experience and end up spending around £600 on an unnecessary sink! We do feel that a better blanket set of rules could  be asserted as some local authorities perhaps have too much free reign over the creation of such rules.

A Rise in International Investments
Despite the inconsistent legislation across some local authorities, property regulations in England in general are a huge pull for international property investors. We have noticed  a surge in international investments recently, with around 50% of sales being from international buyers, particularly from newcomers to the market. Our legislation and  current market stability make the UK an attractive place to buy, with yields and ROI often surpassing countries such as Singapore. This is another reason for the rising popularity  of HMOs, particularly in student areas, as they offer year-long tenancies, a more predictable cash flow and higher income streams.

We covered a variety of challenges the property investment market is currently facing in the episode. If you have a solid awareness of the market, you make strategic decisions  and prepare yourself for the changes that could come from a change in government later in the year, then there are ample opportunities for profitable investments.

Here’s the link to the video again if you would like to catch our Managing Director, Sara Newson, in action!