Property letting in Wales… what does the crystal ball reveal for 2014?

Jamie Langley does his best Old Father Time impression and looks back on 2013 – and prognosticates on the 12 months ahead for those involved in property letting…

Well that was the year that was as far as the team at Red Key is concerned – the year we opened our new offices in Newport, saw a massive rise in activity in our Swansea branch, consolidated our presence in Cardiff and even launched a new brand and website.

But enough of us. What’s the health of the housing market? And what does the year ahead hold for those involved in property letting?

If we look at house sales in general, the mood nationally has been very upbeat in terms of more money being lent for mortgages, more homes being built, at-or-above-inflation rises in house prices during 2013, and significant rises expected in house prices over the coming 12 months.

However, each of those positive indicators needs to be put into context – so let’s look at each of the stats in turn

Home loans are expected to reach the dizzy heights of £170 bn this year, according to the Council for Mortgage Lending, boosted by the Bank of England’s Funding for Lending scheme and the Help to Buy programme. That figure set to rise still further – perhaps to £200 bn – in the year ahead.

That figure though, a big rise on the last couple of years, is still a far cry from the 2007 figure of £363bn; and not enough, I believe, to generate an unsustainable bubble, especially with an expected tightening of lending criteria.

And while the total lending for buy to let mortgages was again up from the previous few years – up to around £20 billion – that is still only getting us back to the figure of 10 years ago. Again, not enough to see the market move into runaway mode.

On house sales, RICS is forecasting a rise from 1.05 million this year to 1.2 million next. Again a healthy sign, but still a long way adrift of the 1.67 million recorded in 2006. Indeed, RICS is warning that the predicted rise in new house starts (from 125,000 to 155,000) as welcome as it is, won’t be enough to plug the growing gap caused by the rising population.

There is also a need to put the sizeable regional variations into the mix when you study the stats, with London (once again) setting the pace. Nationally, house prices went zooming up by 5% in 2013, but the London distortion factor meant that the regions saw far smaller rises – 2% in Wales, for instance, to an average £164,000.

However, the regions are expected to see quite a big bounce back next year, with Wales around the 7% average, taking that average house price past £175,000.

So how does it look for landlords in Wales?

If you take on board all those figures, and set it against the state of the economy, being a landlord in 2014 looks even more promising than it did this time last year.

Rental levels have to be linked to people’s ability to pay – and neither should they get out of kilter with the cost of buying. The continued steady growth in the economy is unlikely to be matched by significant rises in wages, but with more people going into work, there is every reason to expect plenty of demand for rented accommodation. So I’d expect rental levels to be slightly above inflation.

Meanwhile there is still not enough supply of homes to meet rising demand, and even the introduction of Wales’ own version of the Help to Buy scheme, which starts in January, is not expected to impact very much on the rented sector.

So the current yields of around 6% should definitely not be eroded – and there’s a healthy capital growth of perhaps 6 or 7% to look forward to as well. If there’s a better place to put your money in 2014, I’d like to know about it!

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