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Times are tough, but opportunities are coming in the property market

The property market has been a tough and treacherous terrain to navigate of late and it doesn’t look like it’s going to get any easier in the near future.

To the faint-hearted, this might be the trigger to get out of the market altogether, but I would advise landlords to dig in and hold on and you will reap the rewards down the line.


As we know, interest rates have soared over the last few years, with 14 increases in a row, and the base rate is currently lying at 5.25%, meaning that mortgage lenders offering variable rates will be around 6.75% at the moment.


This is a far cry from the days when the base rate was just 0.1%, resulting in mortgage rates being around 1.5%.


Unfortunately, according to Tom Bill, Head of UK Residential Research at Knight Frank, and Tarrant Parsons, a Senior Economist at the RICS (Royal Institution of Chartered Surveyors) it is unlikely that we will ever return to this rate.


With that being said, it does seem that interest rates have peaked and so they will not go any higher, which is good news.


The government have set a target of bringing inflation down to 2% by 2025, which is why the Bank of England have put up interest rates much, and it has been working in fairness, with inflation down from highs of 11% to 4.6% so far.


As such, interest rates will start coming down too, with the first cut expected to happen in October 2024 although it could be earlier than this, and then we will reach a level of equilibrium somewhere between 2026-2027, where interest rates will level out at around 4-4.5%, which is where they will likely stay for the foreseeable future.


This is something landlords will have to get used to and for those of you who have been making a profit with a rental yield of 4-5%, this will no longer be possible.


To make matters worse, on a national basis, house prices have fallen by about 5% in the last year and they are expected to fall by another 5%.


But, it’s not all doom and gloom and it’s important to look at the positives.


Between 2020-2022, house prices increased by 25%, so even with the potential 10% fall, existing landlords have still benefited from an overall 15% increase in the value of their properties.

And for those looking to get into the market, when house prices have dropped by another 5% over the next year, this could represent a good opportunity to get into the market.


As for rental yields, the rental market has kept track with rising interest rates and at Rocket we have recognised that and managed to find a particular niche in the market.


We have the ability to buy properties, add value and we’ve let 50+ so far showing in the order of an 8% yield, which allows landlords to cover their mortgage despite increased interest rates, as well as making a profit on their investment.


And over the next 5 years there is expected to be another 20% increase in rental growth, so if you’re just getting into the market now, your property that currently generates £1000 per month will be bringing in £1200 per month by around 2028.


So, while you may be fed up with the property market and think selling up could be the best option, we would advise all landlords to hold on as things will get better.


If it makes you feel any better, landlords are not the only ones suffering right now, the number of sales transactions has fallen by 20% over the last few years, which has had a dramatic effect on agents.  


The number of vacancies in the real estate industry has fallen by 40% as agents are forced to lay off staff and there are far fewer jobs available as construction has slowed.


And yet, here at Rocket we remain steadfast and confident in the future of the industry and so we urge landlords to stick with us and together we will prosper as there are always opportunities to look out for in times of turmoil.