As a proudly independent Bath business, we know the importance of supporting and investing in our local community – especially during such difficult times.
This is why we have a company tradition of donating a percentage of our annual profits to charitable causes in the Bath area.
Every year, the Reside team researches and discusses local charities, before deciding which to support. We are delighted to confirm that the team has chosen Off The Record and Bath City Farm as this year’s charities.
Reside has previously supported Off The Record, whose brilliant work improves the emotional health and wellbeing of young people in Bath and North East Somerset. We have always been struck by the energy and dynamism of their team, and the Reside staff unanimously voted to continue our support of their hard work.
“Reside Bath have been strong supporters of our work with young people in B&NES over the years and I am delighted that you have chosen to support us again. Your donation will help us to improve the mental health and emotional wellbeing of more young people through our community listening support services in Bath, Radstock and Keynsham.” James Brown, Off The Record
Bath City Farm has been a feature of the city’s community for more than two decades, offering 37 acres of farmland with a café, adventure playground, amphitheater and allotments. They work with people living with poor mental health, learning disabilities and other complex needs, offering therapeutic wellbeing sessions and helping children to get closer to nature.
“My sincerest thanks on behalf of everyone at Bath City Farm. I’m so glad to hear that your staff know about us and support the work that we do, and that many access the site with their families. This means so much to us to know that there is support from within the business community. This donation has come at a very welcome time and will make a big difference.” Brendan Wistreich, Bath City Farm
We are delighted to support these two charities who give so much to our local community, and wish them every success for 2023.
Reside is an award-winning independent letting agent in Bath. Please get in touch if you would like to discuss any aspect of letting or managing your property; we would love to hear from you.
The number of properties available to rent in Bath has dropped from 1,086 to 951 since February 2020.
The average rent a tenant has had to pay in Bath has risen from £1,409 to £2,245 since February 2020.
Many Bath landlords have cashed in on the post-lockdown property boom of the last two years and sold their properties to owner-occupiers – not fellow landlords.
The supply of Bath rental property isn’t near what is needed, which is of benefit to Bath landlords rather than Bath renters.
The Bath rental property shortage is currently very evident. In this article, I will investigate why there is such a significant lack of homes available for rent across Bath and what it means for buy-to-let investors.
Anybody who enjoys surfing the property portals (Rightmove, Zoopla and On the Market) will have observed an emerging trend that the number of properties available to rent in Bath has dropped considerably in the last couple of years.
This reduction has been seen all around the UK as well. For example, on 1st November 2020, there were 372,931 properties to rent on portals. By the 1st November 2021, that had dropped to 275,650; by the 1st November 2022, that had fallen to 171,224.
That doesn’t mean the number of privately rented homes in the country has dropped by over half. Fewer properties are coming onto the market to rent. I will explain why in this article.
For tenants, especially over the last 12 months, it has become progressively more challenging to find a rental home, thus making the rent they must pay go up. This state of affairs in the property market isn’t showing an indication of getting any easier either, making for a hard time for Bath renters.
So, what is the reason behind the Bath rental property shortage, and what does this mean for existing Bath landlords or those potential investors considering buying a Bath buy-to-let property soon?
Several different components are making the perfect storm in the UK property market.
Firstly, the number of households in the UK.
The UK has not been building enough homes for the last 20 years. I appreciate that parts of Bath seem like one huge building site, yet as a country, we are woefully undersupplied with property to live in. This has meant house prices continue to rise due to demand.
The government have known about this issue for decades. The Barker Review of Housing Supply published in 2004 stated that the UK had experienced a long-term upward trend of 2.4% in real house prices since the mid-1970s because of a lack of house building. The report stated that 240,000 houses needed to be built each year to keep up with demand.
The average number of houses built since the mid-1970s has been around165,000 per year, meaning the UK is short of 3,375,000 houses
(i.e. 45 years multiplied by 75,000 missing homes per year)
Several years ago, the government set a target to build 300,000 new homes each year to address this issue.
However, in 2019/20, the actual number of homes delivered stood at just 243,770. In 2020/21, the number of properties built dropped to only 216,000 new homes. In a nutshell, there are fewer available homes to buy, meaning fewer available homes to rent.
Secondly, Bath tenants are staying in their rental homes longer.
A Bath first-time buyer’s average house deposit is £49,592
The average rent of a Bath property in November 2022 is £2,245 per calendar month (up from £1,409 per calendar month in February 2020) – quite a rise!
These numbers translate into Bath renters not being able to pay the rent and be able to save for a deposit, or if they are saving, it is taking a lot longer to save for a deposit due to the cost-of-living crisis and higher rent costs.
Also, many Bath tenants have decided to stay in their existing rental homes because of the rent rises. Many landlords are less inclined to raise the rent on an existing property when they have a decent tenant who keeps the property in good condition and pays rent on time. Anecdotal evidence also suggests that rent arrears in those properties are dropping as tenants know if they don’t pay the rent, the chances are they will have trouble finding another property, and if they do, they will have to pay a lot for their next rental home.
For Bath landlords, this is all positive news – tenants are staying for longer in their rental properties, arrears are lower, and void periods are less likely. When it comes to the market there is less competition (because of the decrease in the availability of Bath rental properties) so this makes the investment an even better bet.
Thirdly, landlords are selling up on the back of recently increased house prices.
It would be difficult for Bath buy-to-let landlords to ignore the rising property prices in recent years.
The average property value in Bath in the summer of 2022was 12.5% higher than in the summer of 2021.
For some buy-to-let landlords, especially those who were classified as ‘accidental landlords’ (an accidental landlord is a landlord who never chose to become a landlord, it was just after the Credit Crunch of 2008/9, they found themselves unable to sell their property, so they temporarily let their own property out), they chose to ‘cash in’ on the higher house prices. This would have also contributed to the lack of available Bath homes for rent.
Yet everything isn’t all sweetness and light for Bath landlords.
Landlords have a few costs to consider before investing in buy-to-let, including everything from regular refurbishment costs, buildings insurance, letting agents’ fees, income tax, and not forgetting stamp duty.
Talking of costs, one issue some Bath landlords are facing is their failure to plan financially for the recent mortgage interest rate rises. Some landlords may have become complacent to the ultra-low Bank of England base rates we have had since 2008 and, therefore, may need to sell their rental property, which, if bought by a first-time buyer, will remove another property from the Private Rented Sector.
Another hurdle to jump is the proposed new regulations requiring better energy efficiency for rental properties. It is proposed that all new tenancies must have at least a minimum of a ‘C’ rating for their EPC (Energy Performance Certificate) from 2025 (and 2028 for all existing tenancies).
Therefore, as a buy-to-let Bath landlord, it is wise to do your research to make sure the buy-to-let opportunity is correct for your rental portfolio, particularly when it comes to weathering any impending financial storms.
Landlords need to consider the returns from theirBath buy-to-let investments.
Landlords can earn money from their buy-to-let investments in two ways. One is the property’s capital growth, and the other is the rental return (often expressed as a yield). In 96% of buy-to-let investments, there is an inverse relationship between capital growth and yield (i.e. properties that tend to go up in value quicker will have lower yields 96% of the time – and vice versa).
Getting the best balance of yield and capital growth depends on your current and future needs from your Bath buy-to-let investment.
What does all this mean for the Bath rental market?
The continued shortage of Bath rental properties means it will be more difficult than ever to find a Bath property to rent, and so rents will continue to grow.
Unlike in Scotland, England and Wales do not have rent controls, with Westminster ruling out the possibility of introducing rent control here to deal with the cost-of-living crisis.
You would think rent controls would be a no-brainer, yet economists from around the world have proved for the last 75 years that rent controls might help tenants in the short term, yet ultimately it drives landlords to sell their investments in the long term, thus reducing the stock of available properties to rent out (not great for future tenants).
Therefore, it is highly likely that Bath rentswill continue to rise for tenants.
Landlords who persevere with their Bath buy-to-let properties or become a Bath buy-to-let landlord are set to benefit because they have an asset in very high demand.
The housing shortage, not to mention the other issues discussed above that are affecting the supply of rental properties, is unlikely to be fixed anytime soon!
In conclusion, the Bath rental market is a constantly changing picture. What is known is that the supply of rental properties is far from what is needed, which can only be to the benefit of buy-to-let investors rather than of tenants renting.
I see buy-to-let as a long-term investment. Everyone reading this knows that the real value in your buy-to-let investment is playing the long game, allowing your Bath buy-to-let investment to grow over time. Like the crypto or stock market, getting sucked in by get-rich-quick schemes that are selling ‘apparent quick wins’ in property investment is very easy.
Reside is an award-winning independent letting agent in Bath. Please get in touch if you would like to discuss any aspect of letting or managing your property; we would love to hear from you.
The final episode in our ‘Masonic Trilogy’. First it was The Circus… then the Royal Crescent… and now Queen Square!
Reside is an award-winning independent letting agent in Bath. Please get in touch if you would like to discuss any aspect of letting or managing your property; we would love to hear from you.
Everything you need to know about the rental market in Bath & beyond during September 2022.
This month, Toby talks about the practice of offering over asking rent, and looks at some recently introduced landlord legislation.
Reside is an award-winning independent letting agent in Bath. Please get in touch if you would like to discuss any aspect of letting or managing your property; we would love to hear from you.
It’s been a tough week to keep up with exactly what’s happening to Section 21. Although this video was recorded shortly before the PMQs during which the Prime Minister appeared to confirm that Section 21 would be abolished, it’s pretty much hit the nail on the head (if I do say so myself!).
It’s been a tough week to keep up with exactly what’s happening to Section 21. Although this video was recorded shortly before the PMQs during which the Prime Minister appeared to confirm that Section 21 would be abolished, it’s pretty much hit the nail on the head (if I do say so myself!).
Reside is an award-winning independent letting agent in Bath. Please get in touch if you would like to discuss any aspect of letting or managing your property; we would love to hear from you.
The start of October has brought no fewer than three changes to regulations affecting landlords. Here’s Toby with everything you need to know.
Reside is an award-winning independent letting agent in Bath. Please get in touch if you would like to discuss any aspect of letting or managing your property; we would love to hear from you.
Well, what a weekend that was. Street parties, gatherings in the park, the purple bunting, egg and cress sandwiches, union jack flags, cheese and pineapple on cocktail sticks, and let’s not forget the trifle – the Platinum Jubilee Party. And no decent party is worth its salt without a game or a quiz.
So, if you have post-Jubilee blues, let me ask you, how much was the average Bath house worth in 1952?
To start with, let me look at what a property is worth today in Bath.
The average price paid for a property in the Bath areain the last 12 months was £497,590.
Now, let’s go back to 1952. Sir Winston Churchill was the Prime Minister, Newcastle won the FA Cup, London was covered in the Great Smog, free prescriptions on the NHS ended (it cost 1 shilling or 5p in new money), and King George IV, at the age of 56 passed away on the 6th February, meaning Princess Elizabeth became the Queen. As for housing …
The average price of a Bath home in 1952 was £4,063.
This means Bath house prices are 121 times higher since 1952.
Yet over the last 70 years, the country has been subjected to 4.5% per annum inflation.
The 1952 Bath home is equivalent to £78,133 todaywhen adjusted for inflation.
This means Bath house prices have increased by 504.8% in real terms since 1952.
So, does that mean house prices are more expensive today compared to 1952?
In 1952, the average annual male wage was £452, 8 shillings and 1 pence, meaning the average Bath house was 8.98 times the average value of a wage. Today the average home is 8.85 times the average wage.
Yet let us not forget the average mortgage payment in 1952 was £11 per month. The average Brit earned £34 per month, meaning 32.3% of the household income was going on mortgage payments, whilst nationally today, according to Nationwide, it stands at 28%.
It’s cheaper, in real terms, to buy a property in 2022 than in 1952.
And that’s the point, some things in ‘real terms’ (real terms being true spending power of the money after taking into account wages, costs and inflation) were more expensive and some cheaper 70 years ago. For example, in 1952, petrol was equivalent (in today’s inflation-adjusted prices) to £1.02 per litre, a pint of beer £2, half a dozen eggs £2.20, cheddar cheese £2.40 per 500g, a basic radio £430, a Hoover £530 and a 12-inch TV £1,600.
So back to property… The Queen’s reign has seen some amazing house price rises in the UK, yet that growth hasn’t always been in a constant upward direction, as we have had a couple of dips along the way.
We had a house price crash in 1990, when the average value of a Bath property dropped from £122,264 to £101,259 in 1996, only for them to start rising again.
Bath saw another house price crash between 2008 and 2009, when the average house price dropped from £365,746 to £311,803 in a year.
What else has changed about property and housing since the Queen came onto the throne?
In 1952, only 32% of people owned their own home, whilst 50% of people rented from a private landlord and 18% rented a council house.
By the time of the Silver Jubilee in 1977, 56% of people owned their own home, with 12% of people privately renting and 32% rented from the council.
Come the Golden Jubilee in 2002, 70% of people owned their own home, with 11% of people privately renting and 19% rented from the council.
Today, 63% of people own their own home, 20% of peopleprivately rent and 17% rent from the council.
I am sure the property market will be totally different again in another 70 years!
I hope you enjoyed reading this article and do share it with your friends if you find it interesting.
P.S. For all you Rightmove fans, the average Bath terraced home in 1952 was worth £3,959, and a semi in Bath could be bought for, on average, £3,608.
Reside is an award-winning independent letting agent in Bath. Please get in touch if you would like to discuss any aspect of letting or managing your property; we would love to hear from you.
Many commentators believe we have seen the peak of the Bath property market.
So, should savvy bargain hunters wait for Bath house prices to fall?
Or could postponing your house buying for any anticipated price drop be a costly mistake?
Over the last two years, the Bath property market has been a rollercoaster ride of hyperactive demand together with the new sport of getting your offer accepted when you compete with 30 other bidders.
Yet there are clouds on the horizon that theBath property market could be at its peak.
Bank of England interest rates have increased four times in the last few months to try and combat inflation. Meanwhile, many Bath households are finding it tough to counter the most significant drop in real incomes in a single year since records began in the mid-1950s, all at the same time as gas, oil and electricity prices are predicted to rise again in the autumn.
Hence why some economists are predicting house price drops in the coming 18 to 24 months of 3% to 5%.
So, surely this is not the best time to buy a Bath property – and surely savvy buyers should wait for Bath house values to fall?
Is it realistic to see double-digit national house price growth? Certainly not.
The question is how far the Bath property market will slow and whether the slowing will drop into modest falls.
Let me look at household income first.
At best, the outlook is gloomy as real household disposable income is set to drop by 2.4% in 2022/23, the largest drop since records began in 1956 this is despite the £17.6 billion of financial support for British households revealed in Rishi Sunak’s Spring 2022 Statement with the National Insurance thresholds, energy bill support package and duty cut on petrol. Without these changes announced by the Chancellor, real household disposable income would have fallen by an additional 1% in 2022/23.
Click to enlarge
Secondly, as interest rates increase, mortgage rates will increase in line, increasing mortgage costs, so surely that will curtail demand, meaning Bath house prices will drop, and buyers should wait to catch a bargain?
Finally, with inflation on the rise, the real value of people’s savings will decrease quicker, and the value of their deposits will diminish meaning Bath prices will surely drop, and people should wait to buy?
Surely the Bath property market has peaked andbuyers should wait for the bargains?
Well, I don’t think so.
I believe, subject to no significant shocks in the world economy, Bath house price growth will be very slow in the next 18/24 months and go into low single digits (even the odd month dipping ever so slightly into the red), but not the 16% to 19% annual drop we saw in 2008/9.
Let me look at real household income. Every economist predicts growth in real household income in 2023/24 by around 1%.
If the two years are combined, the predicted effect on real household income in the next two years (2022/23/24) is a net loss of 1.4%, whilst in the credit crunch years 2010/11/12, the net loss was 2.7%.
I was looking at the increase in mortgage rates. 79% of owner-occupiers have fixed their mortgage costs and had their affordability stress-tested to Bank of England interest rates of 3% to 4% under the Mortgage Market Review rule changes in 2014. I believe the most significant impact of increasing interest rates will be at the point of taking on a new mortgage by first-time buyers (as opposed to servicing or the porting of an existing mortgage from one house to the next house).
The four successive Bank of England base rate rises, inflation and the rising cost of living are likely to bring more cautiousness over summer and autumn when it comes to people buying a property. Yet, there is still a massive imbalance of demand for property over the number of properties for sale to quench that demand.
The potency of the job market and the ongoing mismatch between the supply of properties (mentioned in last week’s article on the Bath property market) on the market and demand for those properties will support property values.
Finally, the by-product of increasing inflation is that it makes buy-to-let more attractive. If there is a reduction in first-time buyers, this will be counterweighted by more landlords buying again, supporting the current level of Bath properties.
But what if Bath house prices do drop significantly?
So let’s assume that Bath house prices do fall, irrespective of the reasons above, it will not inevitably help Bath buyers.
If we have a house price crash, people tend to find their careers are at risk, and their salaries don’t rise as much. The younger generation (i.e. first-time buyers) often gets hit the toughest by recessions.
If first-time buyers wait until 2024 to buy and Bath property values drop by 10%, that will prove more expensive.
In the last 2008/09 crash, lenders weren’t offering 5% deposit mortgages. The lowest deposit mortgage that first-time buyers could get was with a 10% deposit and even then, they were hard to come by.
When writing this article, first-time buyers can obtain a 5% deposit mortgage for a fixed rate of 2.66% for five years.
The typical terraced house inBath sells for £485,700.
So, if they were to buy now, on this mortgage deal, the first-time buyer would have to stump up a £24,285 deposit and their mortgage payments would be £1,689.37 per month.
Yet, let’s say property values in Bath do drop by 10% in the next 18 months, the terraced house would now be worth £437,130, so a significant saving. Or is it?
Everyone believes interest rates will rise further, so let’s assume they go to 3% by the autumn of 2023. That means the mortgage rate for a 10% deposit mortgage will be in the early 5%s, so let me assume 5.29% (because the banks tend to increase the gap between the base rate and the mortgage rate in recessions to allow for the extra risk).
The monthly mortgage payment on the 5.29% mortgage would be £2,058.88 per month, and you would need to nearly double your deposit to £43,713.
So even if Bath’s house prices did drop by 10%, the first-time buyer would be £4,430 worse off a year in mortgage payments and would have to find double the deposit.
… and then there is the other cost of waiting.
You have two years’ worth of rent to pay. The average rent for a Bath property is £1,636 per month.
If you waited a couple of years for Bath house pricesto drop by 10%, you would spend £39,264 in rent.
Choosing to buy a Bath property makes even more economic sense if it is a long-term choice, as homeowners can ride out any house price drops.
Homeowners who plan to stay in a property can generally rely on getting their money back within six to ten years whilst not paying any rent.
Will Bath prices go up, or will they go down?
Remember, George Osbourne said house prices would drop by 18% in May 2016 if we voted to leave the EU, whilst many economists said they would drop by 5% to 10% when Covid hit in March 2020.
And we all know what happened.
If you think you will be better off owning your own Bath home rather than renting one, don’t bother to wait for the suggested house price drop that may never happen. These are my thoughts, what are yours? Let me know in the comments.
Reside is an award-winning independent letting agent in Bath. Please get in touch if you would like to discuss any aspect of letting or managing your property; we would love to hear from you.
According to some newspapers and pundits, the property market boom could soon be over with the increasing interest rates and inflation.
In this article, I share the 3 fundamental economic reasons why things are different to the last property market crash.
The insider’s way to find out if there will be a property crash.
…and 4 reasons why buy-to-let landlords are coming back into the Bath rental market to protect their wealth and hedge against inflation.
With inflation and the cost-of-living crisis, some say this could cause property values to drop, by between 10% and 20% in the next 12 to 18 months.
There can be no doubt that the current Bath property market is very interesting.
At the time of writing, there are only 334 properties for sale in Bath (the long-term 15-year average is between 870 and 900), meaning house prices have gone up considerably.
According to the Land Registry…
Bath property prices have increased by 14.5%(or £53,100) in the last 12 months.
So, as Robert Kiyosaki says, ‘the best way to predict the future is to look to the past’. I need to look at what caused the last property crash in 2008 and how that compares to today.
Increase in Interest Rates
One reason mentioned as a possible cause of a crash is the rise in the Bank of England interest rates affecting homeowners’ mortgages.
Higher mortgage rates mean homeowners will have to pay a lot more on their mortgage payments, leaving less for other household essentials. In 2007 (and the 1989 property crash), many Bathonians put their houses up for sale to downsize to try and reduce their mortgage payments.
Yet the newspapers fail to mention that 79% of British people with a mortgage have it on a fixed interest rate (at an average mortgage rate of 2.03%).
Also, just under 19 out of 20 (93.2%) of all UK house purchases in 2021 fixed their mortgage rate.
So, in the short to medium-term (two to five years), most homeowners won’t see a rise in mortgage payments for many years. Also, 27.8% of all UK house purchases were 100% cash (i.e. no mortgage).
Of the 932,577 house purchases registered since February 2021 in the UK, 259,205 were bought without a mortgage.
Yet some people say it will be a problem when all these homeowners come off their fixed rate. The mortgage lending rules changed in 2014, and every person taking out a mortgage would have been assessed at application as to whether they could afford their mortgage payments at mortgage rates of 5% to 6% rates, not the 2% to 3% they may well be paying now.
No pundit says the Bank of England interest rates will go above 2% with a worst-case scenario of 3%. If the Bank of England did raise interest rates to 3%, homeowners would only be paying 4.5% to 5.5% on their mortgages and thus well within the stress test range made at the time of their mortgage application.
This means the probability of a mass sell-off of Bath properties or Bath repossessions because of interest rate rises (both of which cause house prices to drop) is much lower.
House Price / Salary Ratio
Another reason being bandied about by some people for another house price crash is the ratio of average house prices compared to average wages.
The higher the ratio, the less affordable property is. In 2000, the UK average house price to average salary ratio was 5.30 (i.e. the average UK house was 5.3 times more than the average UK salary). At its peak just before the last property crash in 2008, the ratio reached 8.64.
The ratio now is 8.85, so some commentators are beginning to think we’re in line for another house price crash. However, I must disagree with them because mortgage rates are much lower today than in 2007. For example…
The average 5-year fixed-rate mortgage in 2007 was 6.19% (just before the property crash), yet today it’s only 1.79%.
So, whilst the house price/salary ratio is the same as the last property crash in 2008, mortgages today are proportionally 71.1% cheaper.
Banks’ Reckless Lending
Another reason for a property crash in 2008 was the reckless lending practices in the run-up to that crash.
The first example of reckless lending was self-certified mortgages. A self-certified mortgage is when the lender doesn’t require proof of income.
In 2007, 24.6% of new mortgages were self-certified mortgages.
So, when the economy got a little sticky in 2008, the people that didn’t have the income they said they had to pay for their mortgages (because they were self-certified) promptly put their properties on the market.
The banks’ second aspect of reckless lending was how much they lent buyers to buy their homes. Today, banks want first-time buyers to have at least a 10% deposit and ideally more. There are 95% mortgages available now (meaning the first-time buyer only requires a 5% deposit), yet they are pretty challenging to obtain.
Back in 2005/6/7, Northern Rock was allowing first-time buyers to borrow 125% of the value of their home. Yes, first-time buyers got 25% cashback on their mortgage!
In 2007, 9.5% of all mortgages were 95%, and 6.1% of mortgages were 100% to 125%.
Meaning that nearly 1 in 6 mortgages (15.6%) taken out in 2007 had a 95% to 125% mortgage.
When the value of a property goes below what is owed on the mortgage, this is called negative equity. A lot of Bath homeowners with negative equity (or who were getting close to negative equity) in 2008 panicked because of the Credit Crunch and put their houses up for sale.
To give you an idea of what happened last year (2021) regarding mortgage lending, only 2.4% of mortgages were 95%, and 0.2% of mortgages were 100%. This is because the mortgage lending rules were tightened in 2014.
So why did Bath house prices drop in 2008?
Well, in a nutshell, a lot more Bath properties came onto the market at the same time in 2008, flooding the Bath property market with properties to sell.
Meanwhile, mortgages became a lot harder to obtain (because it was the Credit Crunch), so we had reduced demand for Bath property.
Prices will drop when we have an oversupply and reduced demand for something. Bath property prices fell by between 16% and 19% (depending on the property type) between January 2008 and May 2008.
So, what were the numbers of properties for sale in Bath during the last housing market crash?
There were 867 properties for sale in Bath in the summer of 2007 (just before the crash), whilst a year later, when the Credit Crunch hit, that had jumped to 1,708.
This vast jump in supply and the reduction in demand caused Bath house prices to drop in 2008.
Compared with today, there are only 334 properties for sale in Bath, whilst the long term 15-year average is between 870 and 900 properties for sale.
So, what is going to happen to the Bath property market?
The Bath house price explosion since we came out of Lockdown 1 has been caused by a shortage of Bath homes for sale (as mentioned above) and increased demand from buyers (the opposite of 2008).
However, while there are early signs the discrepancy of supply and demand for Bath properties is starting to ease, this takes a while before it has any effect on the property market – so it will be some time before it takes effect.
This will mean buyer demand will ease off whilst the number of properties to buy (i.e. supply) increases. This should gradually bring the Bath property market back in line with long-term levels, rather than the housing market crash.
My advice is to keep an eye on the number of properties for sale in Bath at any one time and only start to worry if it goes beyond the long-term average mentioned above.
But before I go, I need to chat about what inflation and the cost of living will do to the Bath property market.
How will inflation and cost of living affect the Bath property market?
There is no doubt that cost-of-living increases will have a dampening effect on buyer demand. If people have less money, they won’t be able to afford such high mortgages. This will slow Bath house price growth, especially with Bath first-time buyers.
Yet, the reduction in first-time buyers is being balanced out by an increase in landlords’ buying, especially at the lower end of the market.
This, in turn, will stabilise the middle to upper Bath property market. This means the values of such properties (mainly Bath owner-occupiers) will see greater stability and a buyer for their home, should they wish to take the next step on the property ladder.
So why are more Bath landlords looking to extend their buy-to-let portfolios, even in these economic circumstances?
I see new and existing buy-to-let Bath landlords come back into the market to add rental properties to their portfolios. As the competition with first-time buyers is not so great, they’re not being outbid as much.
Yet, more importantly, residential property is a good hedge against inflation.
Firstly, in the medium term, property values tend to keep up with inflation.
Secondly, inflation benefits both landlords and existing homeowners, with the effect of inflation on mortgage debt. As Bath house prices rise over time, it reduces the loan to value percentage of your mortgage debt and increases your equity. When the landlord/homeowner comes to re-mortgage in the future, they will receive a lower interest rate.
Thirdly, as the equity in your Bath property increases, your fixed-rate mortgage payments stay the same.
Finally, inflation also helps Bath buy-to-let landlords. This is because rents tend to increase with inflation. So as rents go up, your fixed-rate buy-to-let mortgage payments stay the same, creating the prospect of more significant profit from your buy-to-let investment.
Reside is an award-winning independent letting agent in Bath. Please get in touch if you would like to discuss any aspect of letting or managing your property; we would love to hear from you.
Reside has previously supported Off The Record, whose brilliant work improves the emotional health and wellbeing of young people in Bath and North East Somerset. We have always been struck by the energy and dynamism of their team, and the Reside staff unanimously voted to continue our support of their hard work.
Bath City Farm has been a feature of the city’s community for more than two decades, offering 37 acres of farmland with a café, adventure playground, amphitheater and allotments. They work with people living with poor mental health, learning disabilities and other complex needs, offering therapeutic wellbeing sessions and helping children to get closer to nature.
