Investment Market Update

Neil Dawkin, Director of HOP Investments, shares a run down of the latest trends in the Leeds Investment market.

In late Autumn, the professional rental market typically quietens down. This year, however, due to the lack of rental stock, the lettings team continues to see substantial demand. Despite rental increases, we are seeing multiple applications for every property listed and quality properties being snapped up at record rates.

In an interesting turn of events, many more professionals are now seeking out rooms in shared houses. One reason for this is the number of graduates choosing to stay in the city, living with friends, when they complete their studies; another is to save/share costs in the current climate. This increased demand has, in turn, increased the price levels for room shares. For investors, it’s always worthwhile thinking if a room-by-room strategy would be beneficial.

Of course, November also marks the start of the student season, and if you are an investor with an HMO in one of the key student areas, then this is the peak time for marketing as the competition for 2023 homes begins in earnest. 

With that in mind, things have been busy on the refurb front, with 5 HMO refurbishment projects (29 rooms) nearing completion. Follow us on Instagram for all the latest updates and ‘before and after’ shots.

On a sales front, things have quietened down in both the investment and owner occupier markets – both in terms of those holding off selling and those seeking to purchase. With increased interest rates, the yields for BTL’s and HMO’s will also need to rise to combat higher borrowing costs. This will be achieved through rental growth (which is still increasing) and lower prices for certain properties.

That said, there are still sales going ahead. We recently marketed a portfolio of eight 1-bed and 2-bed houses in LS6, which – despite the market turmoil – generated a larger than expected number of enquiries and we are pleased to have agreed a sale.

Things to look out for when seeking an investment property are: strong rental track records (these had virtually no void periods in the last ten years!) and opportunities to add value through updates or further development.

Mortgage rates do appear to be settling down and for those who can purchase for cash or a higher deposit, there are good deals to be had, as other investors hold back on purchases. We expect to see increased competition in the mortgage market in January, and an expectation that rates may decrease further.

The Autumn budget has not made significant changes to the landscape. However, a couple of the main takeaways are the reduction in capital gains and dividend allowance, amongst other tax freezes and adjustments, which generally reduce returns for many Landlords and Investors.

The increase in national minimum wage to £10.42 and extension to the energy price cap (though increased to £3,000) should assist many in the rental market with the cost of living crisis.

2023 looks to be an interesting year, challenges await… but so do opportunities!

There is a undersupply of rental properties, and that’s unlikely to change with the current policies in place. The questions are… Will rents continue to rise? Will the government change it’s stance on landlords? What will the base rate peak at? What will happen to house prices?

If you are thinking of investing in BTL property in Leeds next year, why not take a look at our Property Sourcing service for an easy way to start – or grow – your investment portfolio.

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