UK’s Changing Property Market: How Brokers Need to Adapt

Over the past five years, the housing market in Britain has seen many changes, prompting a warning to brokers that they need to adapt and rethink the way they do things.

The impact of Brexit, followed closely by the COVID pandemic, and now the spiralling cost of living on the shape of the property market cannot be underestimated.

Graham Hayward, chief operating officer at rental guarantor service Housing Hand, said: “This means brokers will have to rethink their model, as where they sit in the marketplace, they are being challenged and squeezed.”

The advice to brokers is to ensure their model is more digital to keep in line with government legislation, which is certainly moving in this direction.

There is clear evidence that the buy-to-let market is seeing a dip with the continuing rise in inflation and the cost of living, making affordability more challenging.

Marc Schneiderman, director of Arlington Residential, said: “We are still seeing strong competitive bidding from buyers keen not to miss out.”

“However, there is undoubtedly a sense that the market may be cooling down. A rise in interest rates, high inflation, fear of further increases in the cost of living may all contribute to a slowdown, in particular in the sales market.”

The lack of housing stock is also having a direct effect on the prices of homes, resulting in escalating purchase prices and rental rates.

Tomer Aboody, director of property lender MT Finance, added: “Rising interest rates could help curb the uptick in property prices should they get to such a level that borrowers can no longer afford the mortgages they need to purchase these homes.”

“This would reduce demand and, in turn, slow down the pace of price growth.”

The expectation is that the number of people unable to buy property and forced to rent will continue to expand, adding to the problem of a lack of supply of private rental accommodation on the market.

Hayward added: “The UK market flattened during COVID and Brexit, but the purpose-built student accommodation market is coming back, and build-to-rent is thriving and expanding at an alarming rate.”

“The changing demographics, with less overseas influence among renters and an increasing shift towards servicing UK renters, have meant that generation rent is expanding as the ability to buy houses is becoming limiting.”

“Generation rent is not going away, and their requirements for renting have changed, as they want the full experience, demanding more for their money.”

There are regional differences when it comes to buy-to-let. In London, you can expect a yield of 3% to 4% annually, while in Glasgow’s West End, where real assets are readily available, you can see a yield of 6% in a year.

John O’Malley, chief executive of Glasgow-based Pacitti Jones, added: “Currently, sales prices in Glasgow aren’t ”broken” – people have just decided to put more value into where they live.”

“The house price index in Glasgow has risen by 10% throughout 2021, and we’re told that inflation will peak at between 7-8 % CPI, so it’s not running rampantly ahead of inflation.”

“When people are worried about inflation, they like to invest in real assets, and real assets provide a good asset class.”

Jeremy Leaf, former RICS residential chairperson, commented: “In many ways, what is happening in the sales market is being mirrored in lettings.”

“Shortage of stock remains on both sides, while demand remains strong, even though inflation reached a 30-year high, and many are facing a record drop in living standards, according to the government’s own financial watchdog.”

He also noted that the latest figures from the ONS (Office of National Statistics) show rental growth at its highest in five years, at 2.3% per year, but on the other hand, buying a property now requires 9.1 times income, whereas it was 7.9 times just a year ago. The average house price currently sits at a record-breaking £273,762.

Leaf added, “These eye-watering numbers have prompted fears of an affordability crisis.”

“However, the purchasing power of savings is still driving activity while the pandemic-inspired race for space is not yet finished, so we don’t expect a sharp correction for the rental or sales markets.”