Features / Feature
What’s next for Bristol’s housing market
It’s no secret that Bristol’s house and rental markets have been red hot in the last year, the centrality of housing to the mayoral manifestos indicative of the problem.
Driven by limited supply, cheap mortgage rates and increased age limits (85 years with Nationwide and 80 with Halifax), spiralling prices in London sending cash-rich buyers down the M4, school catchment areas and the electrification of the train line to the capital, the mercury has been rising in Bristol’s housing market.
Statistics from Rightmove show that the average house price is now £259,388, up 8 per cent on last year and 19 per cent since 2013; numbers from Hometrack suggest that prices have risen 13.5 per cent in the last 12 months. The average rent for a new tenancy rose 18 per cent in 2015 to £904.
Whichever data you consult, prices are rising.
“The property market in Bristol has seen exceptional growth over the past couple of years,” says Mark Leese of estate agent Leese and Nagle. “House prices have typically increased by 20 to 25% period but the question remains despite all this optimism is growth at this rate sustainable?”
But since the treasury’s buy-to-let policies bit in April (an additional 3 per cent stamp duty on buy-to-let properties and reduction in landlord tax relief) coupled with political pledges to build 2,000 more homes, what lies ahead?
“Over the coming year we feel that prices will level out giving a more stable market,” Mark predicts. “The relocation market is not as busy as it was particularly as the market in London has slowed in recent months.”
There are signs of a slight slow-down as second home stamp duty scythes out a proportion of investors and higher prices push some buyers out of the market, but the upwards trajectory looks set to continue.
“It’s set to become a game of three thirds,” says Danny Cox, financial planner at Hargreaves Lansdown. “The first quarter of the year was dominated by a rush to beat the stamp duty hike for second properties on April 1. This is likely to have brought some demand forward and this, combined with the possibility for a Brexit, will overhang confidence and dampen transaction volumes until the referendum on the June 23. The remainder of the year will depend on the vote.”
Mark agrees: “The euro exit vote is probably the most important factor in the housing market this year. An exit vote will lead to more insecurity and this could well lead to supply outstripping demand and a drop in prices for a short while.”
Shrugging off the impact of projected new homes, pointing out that it’s subject to delivery and still short of what the region needs, Danny continues: “Overall the shortage of housing will mean prices should rise over the course of the year with the larger percentage gains continuing with higher transaction, lower values.”
Though prices are universally rising, some pockets are proving particularly popular. The huge hikes in Easton’s house prices were highlighted by one local resident recently, where one angry homeowner spray painted her property gold in protest at rising prices, arguing that ‘houses are homes and not gold mines’.
“Pressed to identify Bristol’s property hotspots, most people would pick Clifton, Southville or the city’s rapidly regenerating Harbourside districts,” says Paul Evans, managing director of Helm Construction. “But it’s clear that increasing numbers of people are prepared to look further away from the city centre.
“A combination of factors including price and practicality is pushing people out of town to suburbs such as Shirehampton and further out into South Gloucestershire. There is increasing demand for homes in up and coming neighbourhoods in South and East Bristol.”
Demand for those central homes has seen a surge in office conversions too. “The use of permitted development rights for office to residential conversions has been popular in most major cities but Bristol in particular has seen a high number of conversions, due to a large quantity of redundant office space coupled with an increasing demand for city centre living,” comments Nick More, associate director at Colliers.
Setting aside the issues of affordable housing and supply for Marvin, is it still worth investing?
For home buyers not yet priced out of the market, there seems to be little point in waiting as prices continue to increase.
The same goes for investors. “The UK remains obsessed with house prices and the perception that bricks and mortar always pays,” concludes Danny, adding that it still seems to be true. “While interest rates remain at such low levels, with little prospects of increasing, and with housing shortages, rental income and the potential for capital gains will outweigh the additional costs for many.”
But financial advisor Max Tennant who owns Redcliffe wealth management company ifamax, advises caution.
“The British continue their love affair with being buy-to-let landlords. After all, with bank deposit and mortgage rates so low, and a rapidly rising property market, it all seems so simple: take your cash and make a 20 per cent down payment on a buy-to-let property and borrow the rest at a low rate of interest; then find a tenant – perhaps one of the younger generation who cannot afford to get on the housing ladder – who will pay rent in excess of the mortgage payments.
“What could go wrong? In short, a lot.
“Unfortunately for buy-to-let landlords, the Bank of England has a keen eye on the buy-to-let market. In its recent Financial Stability Report, it cites a buy-to-let bubble bursting as a major risk to the UK economy.
The Chancellor too has a particular interest in the buy-to-let market for social, economic and fiscal reasons. As a result of recent budgets, turnover, not profit, becomes the main focus of the buy-to-let tax regime.”
Allowances that were previously fixed – favourably – have been adjusted, making buy-to-let properties a lot more expensive to run.
“Buy-to-let is likely to look far less appealing to new investors, particularly those with high loan-to-value mortgages, as what used to be profitable, may now, in some instances, become loss making,” Max continues. “Success requires ever rising house prices.
“Let the buy-to-letter beware.”
Main image by Joshua Perrett