September 6

Zoopla: Buy-to-Let Property Sells at 25% Discount


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Zoopla reports that, on average, buy-to-let properties sold by landlords tend to be priced around 25% lower than the broader housing market. In their market overview, the property portal highlights that landlords are facing challenges due to higher mortgage rates, resulting in mortgaged buy-to-let properties constituting approximately 8% of total property sales in the UK. However, it also cautions that buy-to-let investors in southern England now require equity equivalent to 40-50% of the property’s value to make their investments financially viable. Consequently, Zoopla anticipates reduced new investments in this sector for the current year.

The market snapshot reveals, “With an increasing number of landlords selling properties previously rented, there’s now a surplus of homes appealing to first-time buyers. These properties are typically priced at a 25% discount compared to the broader housing market.”

Recently, the portal disclosed that the 2023 sales market is expected to be the quietest in over a decade, with transactions anticipated to be 21% lower than 2022.

Towards the end of summer, there was a 34% decrease in demand for homes compared to the five-year average, accompanied by a 20% drop in agreed sales. Concurrently, the supply was increasing, with listings up by 16%.

Considering the trends observed in the first half of the year, Zoopla predicts that cash sales will experience only a marginal 1.0% decline this year, whereas the number of mortgaged sales is estimated to plummet by a substantial 28%.

Richard Donnell, Zoopla’s Research Executive Director, comments, “House price growth has seen a significant slowdown in the past year due to waning demand, primarily driven by rising mortgage rates. Southern England, in particular, has witnessed steeper price declines, with increased mortgage rates pricing out many potential buyers, thus dampening demand.”

“While UK house prices have managed a marginal 0.1% year-on-year increase, it’s the volume of property sales that has borne the brunt of elevated borrowing costs, especially affecting those reliant on mortgages. Cash buyers, on the other hand, have displayed more resilience and are projected to constitute over one-third of total sales in 2023. Although mortgage rates are gradually decreasing, they need to dip below the 5.0% threshold before we observe a heightened desire to relocate in the latter part of 2023.”

Despite the challenging environment, the overall house prices in the UK have managed to eke out a marginal 0.1% year-on-year increase. However, it’s the transaction volume that has borne the brunt of these elevated borrowing costs, particularly affecting potential homebuyers relying on mortgages to make their purchase. In contrast, cash buyers have proven more resilient and are poised to represent a significant portion of property sales in 2023.

Looking ahead, there is cautious optimism that the housing market could see increased activity in the latter part of 2023, but this hinges on a crucial factor: mortgage rates. While rates have begun a gradual descent, they still need to fall below the 5.0% threshold to reignite a stronger desire among individuals to relocate and invest in property.

These shifting dynamics highlight the importance of carefully monitoring the housing market, as both seasoned and prospective investors navigate the evolving landscape to make informed decisions. Property investment remains an attractive option, but a nuanced understanding of market conditions and financial considerations is essential for success in this ever-changing environment.


Read more Property Investing News HERE


Buy To Let Properties, Buy To Let Values, Zoopla

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