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Interesting Times

Saturday May 1, 2021

Our recent move from letting agency to full-service estate agency comes at an interesting time. A year ago, the general prediction was a flatline for house sales as uncertainty begat caution. In fact, sales have gone bonkers.

Much is written about the stamp duty holiday being a major driver and yes, this is undoubtedly a factor. But there is another less well reported element in play. To put it bluntly, parents of over 45s are dying and leaving their home to their children, many of whom are mortgage free.

Many people use this sad windfall to buy the home of their dreams. Many more use it to give their children a leg up onto the property ladder. A major boost for first time buyers, some of whom are now able to buy a much larger property than their savings alone would allow. Which brings me to a trend I have been predicting on these pages for some years.

First time buyers, with help from the bank of Mum and Dad are buying up HMOs (house in multiple occupation) and converting them from flats back into family homes. This is changing some Heaton streets from grotty bedsit land back to their former glory as proud, period homes.

Other HMOs are being snapped up by new investors as small landlords, unable to keep pace with further investment and new bureaucracy drop out of the market. These new investors have the business acumen and capital to refurbish HMOs to a high standard thus ensuring a healthy return on investment.

And Heaton is their happy hunting ground. Newcastle is among the top ten UK cities for the best rental yields and Heaton is a prime location. Quality housing at reasonable prices coupled with a vibrant street culture featuring entrepreneurial start-ups’ and restaurants put the area ahead of the competition.

Inevitably these factors have resulted in a hotting up of the market. We recently sold a ground floor two bed flat for £162,000. One year ago, we would have valued it at £140,000 and things show no sign of cooling off. Indeed, the buying frenzy was recently fuelled as a report from property data analyst TwentyCi predicted that there are less than two months’ worth of homes left to buy across almost a fifth of the UK.

All this is good news for some. A friend of mine reports that the local property experts (sales people) at one national chain are all sporting new BMWs and Audis. But are we seeing a bubble about to burst? I have mislaid my crystal ball somewhere but certain facts are pretty obvious.

Anyone paying over the odds for their dream property then sinking £60,000 into improvements is unlikely to see that money back in their lifetime. The situation is different for institutional investors who are looking at profit in the long term.

For those fortunate to have access to the bank of Mum and Dad, happy days. For the rest, it looks like generation rent is here to stay. But at least the institutional investors will provide them with comfortable, long term solutions.

There is an old English expression “May you live in interesting times”. Be that a blessing or a curse, it seems those times are upon us.

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