finding opportunities within falling house prices

At the end of March, Nationwide’s house price index reported that the average UK property price had fallen 3.1% over the year to March. Now at £257,122, this is the steepest drop since 2009 in the wake of the global financial crisis.

The seventh consecutive monthly decline, the latest dip leaves prices 4.6% below their August peak – after seasonal effects are taken into account. As Nationwide’s Chief Economist, Robert Gardner notes, activity has “remained subdued” after the turbulence sparked by September’s mini-Budget.


keeping perspective

Despite these figures, it is worth remembering how high house prices have jumped since the start of the pandemic. According to Halifax, average UK house prices grew by 20.4% between January 2020 and December 2022, compared to 7.8% between January 2017 and December 2019. This huge difference points to how prices have been affected by the stamp duty holiday, its subsequent extension and the so-called race for space as supply failed to keep up with demand.


a strong rental market

For many people, this drop in prices will actually be welcome news, particularly for first-time buyers and those looking to capitalise on business opportunities. With RICS UK Residential Survey for March 2023 reporting that contributors saw a 29% decrease in new buyer enquiries, the focus instead seems to be on the rental market with strong demand being seen pretty much across the country.

While the stamp duty holiday – and its subsequent extensions – fuelled demand for properties and subsequently increased prices, the same now seems to be happening in the rental market. Back in November 2022, Rightmove reported that demand for rental homes in the UK rose by 23% in a year. In contrast, private rented housing supply growing just 1% since 2016, according to Zoopla.

Considering these figures, it’s no surprise that this has resulted in higher rents. In fact, the ONS has reported that private rental prices paid by tenants in the UK increased by 4.7% in the 12 months to February 2023. This was up from 4.4% in the 12 months to January 2023.


an opportunity for landlords and investors

While interest rates remain high – although there is thinking that they could start to plateau by the end of the year – the current rental market shows there are still opportunities for landlords and investors. If your client is thinking of purchasing a new property, taking out a bridging loan could allow them to move very quickly.

For example, we were able to assist a client who was the winning bidder on a mid-terrace property, valued at £135,000. The client needed £94,500 to complete the purchase, with a portion of the funds going towards some light refurbishments. Time was quickly running out and the client only had 14 days left in which to complete the purchase, and save the deposit they’d put down at auction.

Within a few hours of receiving the initial enquiry, our team instructed the valuation and issued the checklist of legal requirements to the client’s solicitors. The property was inspected by the valuers the next working day and we received the valuation report within 48 hours. In just under two weeks, we released a £94,500 bridging loan to the client, at 70% loan-to-value of the open market value. The term was set at 12 months. It was due to our strong working relationships with the broker, solicitor, and valuer – as well as the dedication of our case managers and underwriters – that we were able to complete this purchase within the client’s deadline.

Our bridging loan ensured that the client did not lose the investment property or their deposit. The 12-month term will give them enough time to add the necessary refurbishments and increase its value before refinancing out of our loan with a traditional buy-to-let mortgage. As we don’t charge any early repayment or exit fees, the client has the option of paying the loan in less time, without incurring any additional costs.


get in touch

If you are looking to take advantage of the drop in house prices then we are here to help with our range of bridging loans. With lending decisions often made within hours of the initial enquiry, funds can be released in a matter of days. This allows you to take advantage of any time-sensitive opportunities which may come your way. Our range of bridging loans also includes a specially tailored auction product – funds can even be approved in advance to further speed up the process.

If you would like to find out more, our team can be contacted online, via email or on 0203 051 2331.

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