Developers are struggling with the lack of supply of staff and building materials with both costing more, whilst ultimately, sales price of the developments, especially for residential property, is being affected by the increase in mortgage rates and the issues that potential buyers are having to enable them to buy the property. As a developer they are being squeezed at both ends. The recent reduction in Stamp duty land tax is welcomed, but whether this will be sufficient to maintain the residential market is yet to be seen. It is important residential property development does not stop as in the long term more housing is needed.
For landlords it is very difficult and whilst many have fixed rate deals on their mortgages as these unravel there will be issues around the increased rent needed to service the new mortgage deal. We could again see the issues around negative equity as property prices reduce. From discussion with our clients there has been a mixed approach, with clients seeing this as an opportunity to buy properties from other landlords looking to leave the market and buy properties at a discount, and other clients looking to exit. Most of the clients are looking to stay as they are and try to increase the rent.
It seems the next year or so is going to interesting times in the property sector and there is a lot of speculation around property prices going forward. Our advice depends on where the client is in the property cycle, clients with low loan to value on their properties are less likely to be affected and could use their equity to expand, but they need to consider their long-term goals. Therefore, at UHY we believe there is no one fit solution for our clients and need to work with the clients on their strategy.
The next step
If you have any questions regarding this insight please contact Clive Gawthorpe, or your usual UHY adviser.
