Although this could change following the government's rescheduled fiscal statement on 17 November, there is room for cautious optimism as we appear to be heading into this on the back of a quieter few weeks in the UK political arena following such a highly disruptive period.
The full "Autumn Statement" will be delivered by Chancellor Jeremy Hunt and accompanied by separate forecasts from the Office for Budget Responsibility (OBR). Inevitably, this Autumn Statement will impact everyone across the UK in some shape or form and we wait with bated breath to see how markets react and the subsequent knock-on effects across the housing and mortgage markets.
It currently feels like we are in the midst of a transitional period following a time when the purchase market was operating at nothing less than 100mph with house prices rising accordingly. Whilst the BTL market also performed admirably over this period, it’s fair to say that it was overshadowed by the residential sector.
The jury is still out around how the recent market shifts will play out for potential homeowners, existing homeowners, mortgage rates and house prices but, as outlined in research from Alliance Fund, historic market trends show that should the housing sector take a hit, the nation could be in for a rental market boom, as more and more people remain reliant on the private rental sector in order to keep a roof over their heads.
The research shows that in 2008 when the Great Recession hit, property sales volumes across England fell by 49.3% on an annual basis. They then continued to fall by a further 3.1% the following year before rebounding by 6.4% in 2010. At the same time, the level of privately rented stock available to tenants across England rose by 8.2% in 2008, an increase of 261,474 rental homes in a single year. This was followed by a further 7.6% annual increase in 2009, with the addition of a further 261,264 privately rented homes pushing the size of the PRS to a record 3.705m homes.
When the initial market uncertainty of the Covid-19 pandemic hit, the level of homes sold across the property market in England also took a hit, falling 15.9% in 2020, by far the largest annual rate of decline seen since the Great Recession. In contrast, the growth rate of the private rental sector had been showing a steady decline since 2009 and, since 2017, had actually been reducing in size until 2020. However, when the Covid market downturn hit, the level of privately rented stock available across the market increased by 1.1% in a year, the first increase since 2016.
When analysing the market over the last two decades, the research by Alliance Fund shows that sales volumes have increased at a rate of 4.7% per year when the market hasn’t been blighted by an economic downturn, whilst the private rental market has increased by an average rate of 4.1%. In contrast, during periods of economic instability, sales volumes have fallen by an average of 22.8% per year, while the rental market has grown at an average annual rate of 5.6%.
There is no doubt that the reliance on the private rental sector will continue to grow. However, it’s how landlords can maximise any opportunities which present themselves which is the bigger question, and that is where the advice process can play such a crucial part. Especially in a buy-to-let marketplace which is only likely to become even more complex.
