Property Market Insights - August 2022

These past few months we’ve seen a lot of change in our industry.  A lot of this change is driven by recent events such as Covid lockdowns, war in Ukraine and the fuel crisis.  The relationships between these events and the industry can be measured and modelled.

There is also underlying influence on the industry which dates from before 2020 but was accelerated by the pandemic.  This includes the imbalance of affordability in regions across the UK, the gaps between demand for rent and supply of rent, and the oversupply of the wrong types of property or undersupply of the right types of property.

Much of the latter was gradually changing and correcting, but the sudden and sharp shock of the pandemic accelerated this correction, as the market shifted more quickly in line with urgency and speed of offers being accepted.

An awful lot of pundits in our industry sought to try and explain this using simple reasons, for example the stamp duty holiday causing high demand (remember that!), or furlough propping up the industry.  In fact, we still hear this sort of nonsense today.

A small but growing number of investors have begun to use data and insight in our industry so that mistakes can be avoided and profitable, successful property investing be made more easy.  I’m on a mission to deliver this data to these investors through my work in Ultimate Property Dashboard and deliver the data needed to be ahead of the change rather than following it.

Here are my 5 top tips that you can use to get ahead of change and act rather than react:

1.    KNOW THE HOTSPOTS WHERE YOU INVEST

This really drives me mad.  People assume the property market grows and shrinks at the same rate and the same time everywhere.  It doesn’t!  Local areas have ever changing cycles of sudden growth.  Some local areas perform better than others.  Some rise and some even fall.  Saying you invest in a city is not enough. 

You need to know exactly where to invest, how mush to pay now, what it is likely to increase to and when.  You should list out each local area and decide which is best to deploy your resources.  Be efficient to be affluent, as the saying goes and farm high growth areas.

2.    IDENTIFY AREAS BECOMING MORE AFFORDABLE

Since 2020, we’ve seen some quite significant rises in average household income as people relocate and move to new employment or even work from home.  Dozens of areas have seen sudden and sharp increases to average household incomes which were not initially mirrored by property price increase.  This in effect made these areas cheaper to live in!  The property market is very slow to shift in many parts of the UK, but areas of high affordability are now starting to see very high demand and in turn, higher house price and rental yield growth.  Furthermore, achieving strong ROIs in these areas is often much easier.

You need to measure the monthly change in affordability (house price divided by average household income) in your areas and track this over time.  You should also do this for the rental market too.

Both of these measures are published monthly by postcode and property types in Ultimate Property Dashboard.

3.    AVOID DEAD END LOCATIONS

This horrifies me.  So many investors are so fixated on getting big discounts, they buy in areas with major problems.  In the current market, the average property is selling for 6.1% below the asking price.  Bear in mind this is the UK average.  Higher performing areas are in high demand, so it is actually often better to get less off the asking price because the market in this area will grow much more in the near future.

Sadly, areas of low demand, high crime or low and falling incomes often have agents and vendors more happy to accept discounts or money off.  If these are dead end locations, you will not get as much capital growth, often find cashflow harder to come by and ironically end up competing with other investors fighting for business.  Knowing these locations is critical: in June 2022 there were 87 postcode areas where property values and rental values actually fell.  Despite this, many investors were active in these locations.

4.    SELECT THE RIGHT STRATEGY

Not all property types and strategies work in areas of investment.  Measuring the turnover of stock by property type in an area can really help you to focus on the properties most likely to perform well.  This is critical if you plan to buy and refinance, often called momentum investment or buy-refurb-refinance.

You would be astonished by how much demand and capital appreciation varies by size and type of property.  This is more often than not driven by changes to the demographics of an area, or changes to lifestyles including the labour force.

The best way to measure this is to separate out the best performing types of property and focus all of your efforts obtaining deals on these properties.  The laws of supply and demand will work for you, and the value of these ‘in demand’ properties will drive your business forward.  This is particularly important for Houses Of Multiple Occupation.  There are scores of areas where demand for HMO rooms is very high, but supply is low because we don’t focus on these areas.

5.    PLAY IN THE WHOLE MARKET

This final tip is one that should be obvious, but in most instances is not followed.  Be on top of all properties listed in your target areas. Don’t just check Rightmove.  Check Rightmove, On The Market and Zoopla.  Check every day for your target areas.  Don’t miss a single listing.  Always chase up new listings which are in budget and match your strategy.  I find it astonishing that people say they missed out on a property.  How on earth has someone seen, viewed and offered on a property before you got around to calling an agent!

The thing is, this is hard and time consuming if you don’t have the right data and software to automatically read the whole market and summarise potential properties for you every day.  Once again, Ultimate Property Dashboard does this with new data and listings every single day, so if you haven’t tried this data and process, you really should.

Make sure you use data and insights to measure where opportunity is, and capitalise on it.

All the very best,

John