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Property in 2019

Your expert guide

Rightmove director Miles Shipside and property expert Jo Eccles reveal property market trends for 2019, from emerging hotspots to buy-to-let rule changes.

  • Property in 2019 – with Miles Shipside and Jo Eccles
    • Property in 2019 – with Miles Shipside and Jo Eccles (Transcript) Podcast transcript

      Hello, and welcome to the Barclays Premier podcast. Today we’ll be looking at the property world for 2019 and what any upcoming changes might mean for your plans – whether you’re considering buying, selling or investing.

      I’m Olly Mann and today I’ll be talking to two of the very best and brightest in the field, Miles Shipside, founding director of Rightmove, and property guru Jo Eccles, founder of SP Property Group and one of the very experts you can ask in the Sunday Times’ Ask the Experts. And, Jo, I’m going to be asking for your expertise today, but first for people who haven’t heard of SP Property Group perhaps explain briefly what your expertise is.

      Jo: Thanks, Olly. We are a buying agency. We specialise in central London so we find properties for clients for their homes or investment and we also manage a very large portfolio of rental properties for individual landlords.

      And, Miles, Rightmove probably is a brand that people are aware of.

      Miles: I hope so.

      There’s lots of different ways to use your website, isn’t there? A lot of people just look for property prices on it and don’t have any intention of moving at all, so what’s the main focus of your business right now?

      Miles: Well, originally we set up because looking for a property was very difficult, you had to look at local newspapers that came out once a week, so Rightmove’s goal was to get all of the UK estate agents and lettings agents advertising all of their properties in one place to make search very easy but also it gives us a lot of data on the market which hopefully I’ll be sharing with you later.

      OK, well, let’s look at that data straightaway. I mean if you take now, right now, Q1 2019, as a snapshot of the property market what are you seeing?

      Miles: The beginning of every year is always exciting. Is it going to be better or worse than previous years? We’ve seen good demand but it is regional and patchy. Certain parts of the country, particularly the south London commuter belt had some very rapid price rises up until around 2016/2017. Affordability’s become stretched and we’ve reached the peak of the market. Whereas parts of the Midlands further north didn’t see those larger price rises, affordability still good and the market moving particularly well. So we’re seeing price rises still modest in parts of the Midlands and North whereas we’re seeing a readjustment of some of the market in the south with some modest price falls.

      Well, readjustment, Jo. Is that something that you would say you recognise in London and the Southeast as well, a sort of stasis?

      Jo: The prices have been very stagnant certainly since the Brexit vote. I think the forecast for the next 12 months certainly is going to be prices remaining flat and I think the mentality of a lot of people in London is a wait and see, which is very normal when there’s a lot of uncertainty. Saying that, property is an emotional and a needs driven acquisition so there are people who do need to move. So there is still some activity in the market but it’s just not as strong as it, and busy as it has been.

      OK, you’ve mentioned the B word so let’s talk about that, Jo. Do you think once Brexit is out of the way, if it is, that things will change towards the end of the year regarding all this? 

      Jo: It’s such a moving part right now. So I think there was a lot of focus on 29th March and people did think that there would be this moment of clarity on that date and I think the market is slowly realising that actually we probably won’t have that clarity. I personally think it’s probably going to remain beyond 29th March and certainly ‘til the end of the year so whether that, this current level of uncertainty actually becomes the status quo.  

      And then what happens? Because actually I mean without predicting what’s going to happen politically but it seems likely that this is a question that’s going to be hanging over politics for the next decade or so, if that is the status quo, if that is the reality, what happens? Does it recover? Do people start thinking, well, ‘wait and see’ can only wait so long, I need to make a decision?

      Miles: Absolutely. Families don’t stop growing and people’s housing needs and job moves are there. Markets don’t like uncertainty, that’s true, but I think if you take a medium to long term view, which you should do in housing, then there might be some short term volatility but, as Jo says, that does create opportunities. So look at that medium to long term view rather than the short term view and that can actually be a good time to move and a good time to buy.

      Let’s talk about investing. So you’ve got a pot of money. Which area of the country, Miles, should you be going to to invest?

      Miles: Well, Jo will probably talk more about London but we are seeing money flow out of London. There’s a stamp duty surcharge now on second homes, which obviously includes buy to let properties, of 3% so if you’re buying a property with a high capital value that’s a big upfront cost to pay. So investors are canny and they chase better returns and with London not having the same capital growth as it’s had in recent years cities further north, so Birmingham, Manchester, Leeds, Edinburgh, capital costs to purchase less which means you pay less stamp duty but returns between 6, 7, 8%, houses in multiple occupation (a more specialist area), student properties, obviously there’s a lot more regulation so you need a highly qualified letting agent to be advising you, but good returns and these cities are actually seeing not only money from UK investors but overseas investors looking at those better returns.

      And what about either as an investor or for your own family you want to live near enough to London because you do work in London, perhaps not every day but occasionally, how far out are people buying now? You know, are you advising people to be looking at Hertfordshire and Milton Keynes or do we go further north than that?

      Miles: It really does depend on train journeys and costs.

      Give us some names. Give us some cities.

      Miles: Northamptonshire, so not particularly fashionable in some areas. Kettering as well.They had major industries that didn’t perform well and that led to depression in house prices. And then all of a sudden people have said, look, I can get to London within an hour, an hour and a half and the property prices are reasonable so we’ve seen mini booms in those areas because there is capital value, it attracts investors and obviously it attracts owner occupiers as well.

      OK, so we’re all moving off to Kettering. What about your clients, Jo, in London who are looking for something in London? What would you be recommending for them as an investment?

      Jo: Yeah, so I mean obviously with any investment it depends what your objective is, the timescale you’re going to put your money in for, are you looking for capital growth or yield or a combination of the two. Some of our clients buy for pure investment, others are buying perhaps to rent out in the short term and then maybe give to their kids when they come to uni here or for them to use themselves as a pied-à-terre. But generally we, you know, in my opinion there are some really great hotspots right now in London. For example, Clerkenwell I’m a big fan of, we’ve got Crossrail coming through there, it’s quite a small sort of contained area, there are about five developments that I’m very positive on, rental yields relative to other parts of London are very strong, you’re looking at about a 4.3 to 4.6% gross yield.

      Is that per year?

      Jo: Per year, so. And the demographic of tenants and also your resale market whenever you do choose to sell is very diversified. You’ve got people who are lawyers, people who work in finance. There’s a strong tech, digital media culture there as well so it’s a very diversified tenant base.

      So when you’re looking for the next Clerkenwell if you like because Clerkenwell’s obviously being developed now, what are you looking for? Is it an area like that where you think your potential tenants will essentially find it easy to walk to work? What are you looking for?

      Jo: Tenants absolutely want convenience, that’s one big reason why tenants, not the only reason but a big reason why they do rent. Then another way to do it to look at hotspots is, you know, look at an area which is gentrified and look at the periphery of that. So for example another area that I’m a fan of is just north of Marylebone. Marylebone has come up enormously over the past seven to 10 years and there’s a pocket just north of Marylebone Road which is really undervalued in my opinion. It’s got great housing stock.  

      What’s trendy at the moment? What are the properties that people, you know, if they have the money in place and they can make that cheeky offer what are the properties people are actually looking to buy?

      Jo: In a softer market which we’ve got now it’s always beneficial if you’re upsizing to a more expensive property. And the reason for that is if you accept say a 10% discount on the property you’re selling but you manage to negotiate a 10% discount on the bigger, more expensive property the 10% that you’ve got off on your more expensive property means that net you’re actually financially better off. So upsizing in a softer market is often a very good thing to do.

      But does that mean you’re disadvantaged if you’re downsizing?

      Jo: Technically yes, but then if you’re downsizing it’s often a needs based decision so, you know, it’s less sort of opportunistic here.

      Miles: Yeah, we’ll often call it right sizing as opposed to downsizing. It can be a daunting thing. You’ve lived in your property for many, many years, not used to moving. One often moves more often when you’re trading up but then you find your ideal property. It’s very hard to let go of that property because it’s got a lot of emotional ties, you become used to space and neighbours and as you get older moving is more daunting. So if you get 10% less for yours and then you’re buying a cheaper property and you only get 10% off that, yes, technically you might have lost out. You are paying less stamp duty if you trade down so I suppose that’s a positive if you’re buying a cheaper property but these are moves that you can’t, you can postpone for a period of time but as you get older you’re perhaps denying yourself the opportunity to release some equity, spend that money, enjoy that money, enjoy your lifestyle rather than in reality living in a property that’s too big for you and costly to maintain. So postponing that move can be a mistake and one of my big bits of advice when I was in estate agency, moved an awful lot of people, without exception I think everybody left downsizing too late.

      Jo: And also prices aren’t expected to rise over the next, certainly the next 12 months and possibly beyond that, it’s hard to predict, but the predictions are quite muted. So actually you’re probably not going to see the capital appreciation so you might as well act now.

      Can there be merit though on sitting on the property listing until a certain time of the year for a particular type of property? I mean are there types of property that sell better in the summer or at Christmas-time or whatever?

      Jo: Yeah, and family houses tend to be very cyclical so there tends to be more activity around school, you know, the academic school year. You know, and also properties perhaps with an amazing garden they probably fare better in say spring or summer when it’s presenting at its best. So there are some properties that you definitely want to have a think about what time of year it is.

      But then I sort of remember viewing my property in February and thinking, well, if it looks good now then I really like it. Do you know what I mean? Because you think this is the worst time of year and it still, I still like it.

      Miles: That’s true. And if a glut of properties come on to the market when the gardens are all looking great then you’ve got a lot more competition whereas actually if you pitch it just before those come on the market then buyers have got less choice and they can use their imagination and maybe show them a few photos of what it looks like in full bloom as well.

      And for those of us who are homeowners but aren’t selling now but do want the improvements that we make to our homes to be genuine improvements that have value in the market what tips could you offer us? What should we be doing to add value if we’re improving our homes?

      Jo: It’s always a tricky balance because you want to, you’re trying to balance your own personal taste with resale marketability and trying to get that happy medium. A lot of property is period property and I think one mistake that some people make in the whole area of, you know, we love modern, you know, home improvements is to retain character because I’ve seen so many properties which are beautiful, you know, period architecture and all the internal, you know, the architraves, the cornicing had been ripped out. And I think certainly the most popular versions that I see are where someone has really maintained the integrity and the history of the property but put a modern twist on it. And certain things you can change. So for example colour palettes are very cheap and easy to redo when you come to sell but putting in a very bold statement kitchen or bathroom it is much more expensive and if you’re going very sort of one way with your interior design style, if it’s an expensive investment like a kitchen which is just not going to appeal to a lot of the mass market you really need to think twice about that. If you’re going to own the property for 30 years it’s probably not a consideration but if you’re only going to own it for say 10 you might want to think twice about going quite so bold with the materials that you use.

      And what if you’re extending the property? Should you be thinking about en suite bathrooms? Should you be thinking about conservatories or should you just, Miles, build what you like?

      Miles: It’s got to be useful to you but what is useful to you and other people, en suites, numerous toilets in the property seems to be the fashion, sometimes actually more bathrooms than bedrooms and I can’t quite get my head around that one. I think hotel standard, people travel a lot, they’re used to great quality in the hotels to try and recreate that in your property so not only do you get that feel of luxury when you go away, you get it every morning when you wake up as well.

      But that doesn’t mean getting rid of the period features as Jo was saying? Hotel doesn’t mean bling necessarily?

      Miles: Definitely not. And so character and taste are very important. So in my career in property I’ve lived through various improvement fads and I remember external stone cladding. So you’d have this lovely brickwork, often in a row of terraces, but odd properties with stone cladding on, so some strange things that went on. Double glazing and thermal efficiency really important nowadays but do it in character. So we’ve had some bad double glazing over the last 30 odd years but now you’re getting very refined in aspects of double glazing, keeping the character, wood grain effect, almost looking like the original or better than the original but maintenance free as well as thermally efficient.

      Jo?

      Jo: And don’t overdevelop. I think there’s the tendency sometimes to just extend as much as you possibly can and I’ve seen many examples where someone might have extended to the rear but forsaking a garden. And if you’ve got a family house, if you’ve got a big glass extension but no garden that’s going to be an issue when you resell it. Or where someone adds so many bedrooms and there’s very limited reception space. The ratio of bedrooms to reception and kitchen space has to be right. So, you know 

      Can you give us a number on that? Ratio between bedrooms and living space, what’s right?

      Jo: Well, I mean if you’ve got a six bedroom house or, you know, a five bedroom house and you’ve got a tiny little reception and a kitchen that’s probably going to seat four people that’s just not going to work. So you do need to take quite a practical view. So people aren’t just fixated on how big the house is, or the flat, it has to actually work with, you know, who’s going to be living there.

      Miles: And, Olly, you mentioned conservatories earlier. One of the trends now is actually putting a solid roof on your conservatory so that it’s actually usable both summer and winter, doesn’t get too hot in the summer, doesn’t get too cold in the winter.  

      Is that still a conservatory then? That’s just a room with floor to ceiling windows, isn’t it?

      Miles: It has the, it brings the garden into the property which is very appealing but it’s usable all year round.  

      Jo: An orangery.

      Miles: One actually might call it an orangery, indeed.

      Orangery, there we go. Word of the day. Love it. I love the idea that my property could have an orangery. Right. I’m not going to let you go without you giving us a final golden nugget piece of advice. Jo, what is the best advice you can give us about the property market?

      Jo: Well, two things actually. Firstly, go with your gut. A lot of people will be fixated on the financials of the property, what’s it worth, is it good value for money, and sometimes you just need to acknowledge this is a home for you, if it feels right it often is. You can come on to the price afterwards but just go with your gut instinct, it’s really powerful and it’s really important when buying a property.

      And presumably actually that might help you sell it too. If you like it others will too.

      Jo: Yeah, exactly that. And if you’re renting it out tenants will like it as well. And then the other thing is, you know, buying a property can be a really emotional rollercoaster and often the first one doesn’t work out or you get gazumped, the seller decides not to sell or you might lose out on sealed bids. And I would absolutely say that everything happens for a reason. It’s really cliched but in my 13 years of experience whenever a property has been missed out on we’ve ultimately found something for the client which had been better in the long run. So, yeah, console yourself with that if you’re going to through the emotions.

      Miles?

      Miles: A lot of people are perhaps looking to build a rented property portfolio and one thing when I started out in estate agency a very experienced senior partner said to me, the young lad, I’ve never regretted a house that I’ve bought but I’ve regretted every house that I’ve sold. And one thing that he certainly did, subject to finance and wherewithal, he kept his starter property that he was in and then moved to another property, then when he traded up he kept that one as well. And often we see people, obviously two people getting together, maybe both with properties, do you have to sell one? Do you have to sell both? Can you keep one or both when you’re buying your new home together? So it can be a springboard to a property portfolio.  Obviously if you’re in the fortunate position where you can do that and explore ways to do it, it can be a way of getting on to that property investment ladder.

      Emotion and business. Listen to your heart, be mindful of stamp duty. That’s what we like. Thanks very much for joining me, Jo and Miles.

      All opinions are given as of the date hereof and are subject to change.  

      Barclays. Let’s go forward.

      (End of recording)

    The information contained in this podcast is for general information purposes only and is not intended to constitute financial advice. If you are thinking of making an investment in and/or purchasing property, please seek independent professional advice relevant to your circumstances. Barclays does not accept any liability for any losses as a result of relying on the information contained in this podcast. The views expressed by any third parties featured in this podcast are their views alone and do not necessarily reflect the views of the Barclays and the accuracy of any such information from any third party is not guaranteed by Barclays. All opinions and estimates are given as of the date of recording.

  • 5 buy-to-let rule changes and opportunities

    It’s a complicated time to be a landlord with increasing regulations, tax changes and property price fluctuations – but experts say the UK buy-to-let market still has the potential to offer solid returns for savvy investors. 

    We spoke to Miles Shipside, one of the founding directors from property website Rightmove, and property expert Jo Eccles of SP Property Group to find out the latest changes in the buy-to-let market.

    Here are 5 things to watch in 2019.

    1. Emerging hotspots

    Attractive rental returns and lower house prices have made larger cities in the north increasingly popular for investors, says Rightmove director Miles Shipside. 

    “Northerly regions are more active in buy-to-let. While many investors traditionally stuck to areas such as London, there is a real benefit to looking further afield,” says Miles. “Regional cities such as Leeds, Manchester and Edinburgh – which also see the benefit of lower purchase prices and therefore lower stamp duty costs – are booming in investor popularity. We are seeing signs that one of the next big ones might be Birmingham, as well.”

    In London, there are also solid investment opportunities if you know where to look, says SP Property Group founder and director Jo Eccles. “In London, where house prices have risen a lot in the past, many landlords are looking for capital growth as well as yield. Popular areas over the past 12 months have been West Kilburn – particularly for 2-bedroom investments with many landlords looking to acquire period conversions – and Clerkenwell for 1-bedroom and 2-bedroom flats,” says Jo.

    If you’re looking to invest in a new buy-to-let property, find out more about your exclusive Premier buy-to-let rates here. You can also use our buy-to-let affordability calculator to find out if you’re eligible. And remember, your buy-to-let property may be repossessed or a receiver of rent appointed if you do not keep up payments on your mortgage.

    2. Tenant Fee changes

    The Tenant Fees Bill, which will abolish most upfront charges for tenants, is expected to come into force on 1 June this year. 

    The changes – first announced by Chancellor Philip Hammond in 2016 – include a ban on letting agent fees for tenants, a cap on security deposits and an end to many upfront administrative costs. 

    If you're a landlord, this could increase costs as agents may push up their management fees to cover any lost income. The government is also reviewing the practice of ‘default fees’, where tenants are charged for minor indiscretions on their tenancy agreement. For more details, see the latest government documents relating to the Tenant Fees Bill

    Jo says: “The lettings fee ban is just part of the ever-changing and increasingly regulated landscape which landlords need to make sure they are keeping up with.”

    The Tenant Fees Bill will apply to the private rented sector in England and Wales. Letting fees are already banned in Scotland.

    3. Tax changes

    The amount of buy-to-let mortgage interest that landlords can deduct for tax purposes is tapering off – a change which could hit profits hard, says Jo.

    “This will be the biggest one to factor in when doing your investment sums. Navigating changes like these is particularly important in a softer market.”

    Instead of mortgage interest relief, landlords will be allowed to claim a basic rate (20%) tax relief on the entire interest payment. The change means that some landlords, particularly those in higher tax brackets, could end up paying more tax than under the previous system. The changes have been phased in since April 2017. Find out more here.

    To find out more about buy-to-let tax and fees, take a look at our comprehensive guide.

    4. New HMO rules

    New rules came into force in October to redefine what constitutes a House in Multiple Occupation (HMO) and, crucially, which properties need a licence.

    Under the new rules, mandatory HMO licences apply to any property occupied by five or more people, forming two or more separate households. But a council can also include other types of HMOs for licensing and there are exceptions, so it’s important to check with your council whether your property needs a licence. The regulation change also brings into force new minimum room sizes. 

    If you’re a landlord, experts recommend checking if your property comes under the new regulations – and, if so, applying to your local authority as soon as possible. Find out more about HMO regulations

    5. Energy efficiency standards

    Minimum energy efficiency standards for domestic properties launched in April 2018 – and, from 2020, the rules will also apply to existing tenancies.

    As a landlord, you might have to make improvements to ensure any properties you own meet an energy performance certificate rating of E or above. There are complicated rules and exemptions involved in the scheme, so it’s worth finding out if your property will be affected. Find out more here. 

    “In the current climate, for landlords, it’s about how to really squeeze your rental in order to get the most out of it,” says Jo. “Reinvesting in your property to make sure it meets the standards – and looks better – can go a long way in attracting long-lasting tenants.”

    If you’re looking to borrow to improve your property, consider a Premier Barclayloan.

     

    The information contained in this article is for general information purposes only and is not intended to constitute financial advice. If you're thinking of making an investment in and/or purchasing property, please seek independent professional advice relevant to your circumstances. Barclays does'nt accept any liability for any losses as a result of relying on the information contained in this article. The views expressed by any third parties featured in this article are their views alone and don't necessarily reflect the views of Barclays, and the accuracy of any such information from any third party is not guaranteed by Barclays. All opinions and estimates are given as of the date of publishing.

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