Worcester & Droitwich Market Update – August 2019
LOCAL MARKET ROUNDUP
According to HMRC the number of properties sold in May was 11.3% lower than a year earlier, dropping below 90,000 for the first time since May 2016. Nationally, there were 7.8% fewer homes for sale in June compared to a year ago, according to Rightmove, with sales volumes 4.6% lower to date in 2019.
The latest RICS Residential Market Survey suggests the market is beginning to stabilise. Demand levels in May, compared to April, were largely unchanged, following almost twelve consecutive months of decline since this time last year. The Bank of England report mortgage approvals and mortgage lending in May were up marginally on last year.
Our experience across Worcestershire is that demand is steady and the market remains healthy underpinned by some good numbers. I hope the optimism shown by our new PM will rub off on a few politicians in Westminster and Brussels and bring an end to months of frustrating uncertainty over Brexit.
NATIONAL MARKET
Back in 2008/09, almost half (45%) of homes built in the year across England and Wales were flats, with the majority of these having two bedrooms.
Move on ten years and the picture is very different. In the last 12 months, 81% of homes built have been houses. The largest, those with four or more bedrooms, have comprised the dominant property type, representing 36.5% of completions in the year. Amendments to government policy from 2010, the introduction of Help to Buy and the reduction in investment demand, all came together to result in developers building for the occupier market, with the shift in emphasis back towards houses.
ECONOMY
Wages rose 3.6% in the three months to May, the highest rate of growth since 2008 according to new figures released by the Office for National Statistics. Wage growth continues to outstrip inflation, inflation in May was 2.0%, down from 2.1% in April.
After contracting in April, the UK economy rebounded by 0.3% in May, according to the ONS, boosted by some recovery in car production. Meanwhile, the service sector continues to contract as it has done since summer 2018.
UK employment remains at its highest level since 1971. The ONS report 32.75 million people aged 16-64 were in employment in the three months to the end of May. The number of self-employed part-timers has increased to over 1.5 million, more than double 25 years ago.
LETTINGS MARKET
Average rents paid by private tenants grew by 1.3% in the year to June, unchanged from May. West Midlands and East Midlands were the only two regions to experience an increase in rental price growth in June.
According to the RICS, tenant demand rose in May for the fifth month in a row. At the same time, new instructions to let properties declined further (as has been the trend for the past three years) which continues to support rental growth. There were just 5,000 new buy-to-let mortgages issued in March down 9.1% on a year ago according to UK finance.
The number of properties let part or fully furnished across England and Wales is increasing, accounting for 31% of properties let over the past year, up 3% year on year. The proportion of apartments let furnished remains over twice that of houses.
The proportion of properties let furnished has increased in all regions of England and Wales, except for Yorkshire and the Humber, which has seen a slight decrease from a year ago. Furnished apartments, on average (excluding London), rent for £78 more per month, equating to just under £940 more per year, offering a 11% premium over unfurnished lets.
Based on an estimated cost of £2,000–£2,500 to furnish a two-bedroom apartment, for those renting, it would take two to three years of living in a property to re-coup the cost of self-furnishing.