Regional ups and downs

The strongest rental growth has been registered in the South West of England, where prices have risen by 4.3% to &686 per month. London has seen rents fall, with prices down 1.3% year on year; however, it must be noted that it is still, perhaps unsurprisingly, the most expensive place to rent in the United Kingdom with an average price of &1,277 per month. On a monthly basis, the West Midlands and South West are both up by 0.4% compared to September values - showing that variations are indeed highly regionalised.

Lucrative Rents

The rental yield in Northern regions, as is usually the case, earned higher returns than in the South with the average investor in the North East earning an annual yield of 5% in the year to September. Potentially lucrative yields can be seriously hampered by difficult tenants and with tenant arrears currently standing at 10.1%, a rosy picture is being painted for those in the lettings market - as this figure has been as high as 14.6%. Despite nationally strong levels of rental yield from private lettings, the volume of homes being bought privately by individuals in order to let them has decreased since the buy-to-let tax changes, which has resulted in higher tax bills for many second-home owners. 

Growth of Markets

The typical notion of student digs being mildly unappealing and disheveled properties has been turned on its head in recent years, with the student lettings market now exerting a significant influence upon the rental market. Students are now able to access top-quality accommodation in their place of study, and as such, this has become a particularly lucrative market for investors. The return to study for many students in September and October typically sees an upsurge in activity in the private rental sector, and this year has been no different. In addition to a new relationship with the student market, the family lettings market has also grown recently due to greater availability of family properties on the lettings market.

With new properties being built with the express intent to be let out, and the growth of student and family markets, it is evident that the supply and demand for lettings remains strong. This stability is seen through the steadily increasing rental prices nationally, London notwithstanding, as well as the lower levels of tenants behind with their payments. The rental of properties, in lieu of purchasing, is forecast to grow in future years and so the impressive annual yields being reported at the moment should continue to be the case in the coming years.

Increased demand for lettings

An increase in the demand for lettings has had a significant impact upon the property market, with research showing that rental increased as a future tenure from 10% to 13% - reflecting its growing popularity. Growth in the private rented sector has seen a near 30% annual increase and encompassed within this sector is the “Build-to-Rent” market. Over the course of the past year there has been a 45% increase in the delivery of completed “Build-to-Rent” homes with the focus on type of property now shifting from blocks of flats to family housing, thereby supporting the lettings market in the long-term.

Pace of life dictating property requirements

As the pace of life quickens and we become more accustomed to instantaneous connections, our property requirements are reflecting this desire for connectivity - both virtually to networks and physically to one another. “Good broadband” is now regarded as a necessity for the majority of buyers - up to 57% - and twinned with this desire for “good broadband” is the desire to be closer to family and friends - up to 48%. There should be no surprise, therefore, that city living has increased in popularity as cities offer the greater levels of connectivity and accessibility which is now sought-after by buyers.

Fiscal concerns shaping the property market

As the Housing Futures report states, “over the past five years the UK has seen turmoil in the political arena as well as in the regulation and taxation of residential property”. This “turmoil” can be seen in the changing shape of the property market; for example, demand for detached houses has significantly dropped over the last 5 years from 83% to 49%, whilst semi-detached homes have become the most popular. This shift away from larger homes indicates a hesitancy amongst buyers to stretch themselves when it comes to their finances, perhaps also explaining the growth in the lettings market as potential buyers become more financially prudent.

Family ties

Strutt & Parker identified in their housing report ‘26 different property tribes’ - groups of people who are the most prevalent in the property market. One of the ‘tribes’ which will exert the most influence on the property market over the coming years, according to Strutt & Parker, is aptly named ‘The Waltons’ and consists of multi-generational households, much like those seen in years gone by. This multi-generational family home will become more prevalent due to the increasing price of property and the resulting necessity for multiple family members to combine their wealth in order to purchase better homes than if they were to purchase individually, or simply because family members cannot afford to live by themselves. Further to this family aspect in the future purchase of properties, providing financial support for relatives has become one of the key reasons to move home - now up to 22% of those surveyed cite this as a motivator to move home.

As political and policy changes take place throughout the United Kingdom, the property market is flexing to respond to these types of change - this is reflected in the rise of the popularity of the semi-detached home and the continuing growth of the lettings market. Buyers are more aware of their fiscal concerns, and more demanding in terms of their requirement to be well-connected to friends, family and wireless networks. With an ageing population continuing to live longer, the power of the “grey pound” will exert itself upon the property market and, combined with younger generations who have a voracious appetite for property both in terms of letting and purchasing, one thing is for certain - the property market remains extremely financially solvent.

To get you started on your climb up the property ladder, we’ve decided to take a look at some of your best options as a first-time buyer.

Where should you start?

Save. It’s a simple first step, but it’s the one that the majority of buyers struggle with the most. Putting a little away here and there simply won’t cut it, you need to be consistently squirrelling away money, sacrificing holidays and big money spends, in an attempt to scrape your deposit together.

Fortunately, there is help out there. Do some research and find a savings account with the best interest rate. The most popular savings account for first-time buyers at the moment is the Help to Buy Isa.

This account allows you to make monthly deposits of up to &200 until you either buy your first home or reach the &12,000 limit. Once you actually purchase a home, you can put the savings from your Help to Buy ISA towards the deposit, and after the sale is complete you will receive a 25% bonus from the government. For example, if you had &12,000 saved, you would receive a &3,000 bonus after completion.

What are your options?

If you already have some money saved up, but you're just short of the mark, it may be worth considering the following options.

Rent to Buy: Rent to Buy allows you to choose a home that you will one day buy, but in the meantime, you’ll only have to pay a reduced amount of rent (80%), meaning you can save the other 20% for a deposit. Once you enter this scheme, it lasts for five years. During that time, you can buy the property outright, or you can pay for a 25% or 75% share of the property.

0% mortgage: A 0% mortgage is similar to a 5% mortgage, in that a guarantor must put forward 10% of the deposit, whilst you put down nothing. The guarantor will receive the cash back, provided that you keep up with your mortgage repayments.

Bank of mum and dad: When all else fails, what better place to go than the good old reliable bank of mum and dad. Many of the options above require your parents to act as a guarantor anyway, so why not just go straight to the primary source?

Whilst it might seem daunting to begin saving for a property, there are many options that can help you take your first tentative steps onto the property ladder. Do some research and find out which options suit you best.