Assetz reveals emerging property trends as prices rise
Property prices will continue to rise firmly as people choose to move outwards from city centres and prioritise outdoor spaces and home working facilities, Assetz Capital has predicted.
Stuart Law (pictured), chief executive and founder of Assetz Capital, believes that social trends are a key driver of the property market, rather than financial incentives such as the stamp duty holiday and historically low mortgage rates.
“The property market has been very strong for well over a year now,” says Law.
Read more: Assetz Capital working on £20m loan pipeline to meet investor demand
“There was a huge setback in the global financial crisis, with mortgages being hard to get. The market has come back consistently since then, but only at a modest rate.
“In some ways it was surprising to me that the mortgage rates being so cheap wasn’t pushing prices up faster.”
Law remembers when interest rates fell to a historically low rate of around five per cent in the mid-1990s and stayed low until the late 2000s and that this took a while to be noticed by the market and begin to drive prices up.
Rates sank even lower in the aftermath of the Covid-19 pandemic, with historically low mortgage rates available from just about every lender on the high street.
Again, it has taken several years for this to drive prices up again strongly, awaiting another driver in the form of the pandemic.
Recently, the Bank of England has hinted at an imminent rate rise, which has already seen some mortgage rates tick up slightly, but Law expects that this “won’t be the only way the Bank seeks to reduce house price inflation”.
Read more: Assetz aims for 95pc of new homes to be EPC B or higher by end of 2022
“The low cost of funding for mortgages has been around for years,” he says. “It’s just interesting that price inflation hasn’t really kicked off until this point. Much of the price growth indicates a supply/demand imbalance as the pandemic was a catalyst for something that should have probably happened earlier.
“We expect the Prudential Regulation Authority (PRA) to step in shortly and begin to limit bank mortgage lending loan-to-value levels again to take the froth off the market. It’s much more likely than strongly rising interest rates in our view.”
The government recently revealed that average UK house prices rose by 11.8 per cent between September 2020 and September 2021, and Law believes that prices will keep on rising if the PRA doesn’t act soon. However, there has been a shift in the sorts of houses that people want to buy.
“People want to live in different places relative to where they were two years ago,” he says. “They’ve all wanted to move outwards generally. They want more outdoor space, and they want homeworking space.
“Working from home and hybrid working has fundamentally changed for a lot of people the ability to work much further from their office in the place of work. So people are moving substantial distances away.”
While Law hasn’t seen substantial demand for rural properties, he has noticed that far more people are moving out of the cities and into suburbs, towns and villages.
On the commercial property front, the changes are happening much more slowly.
“I think that the reason we haven’t seen acknowledgement of a huge change in the commercial marketplace is because of the lag created by long leases, which is softening off how fast things are changing,” Law says.
“Many businesses are struggling with a lease for a building far bigger than they really need, but maybe they’ve got five years left on their lease.”
Assetz is already prepared for the shifting property landscape by funding houses rather than apartments, usually outside city centres and away from the South East and London.
“Our investors will continue to see some very robust investment opportunities with our housing funding,” Law says.
Read more: Assetz Capital sees rise in commercial to residential conversion cases