Buy To Let investors compete with owner occupiers

Owner occupiers have been competing with landlords in the battle to purchase smaller properties, new figures show.

Smaller properties are often preferred by buyers to let investors because of their relatively cheap purchase price and therefore attractive yields.

The Nationwide says that during 2023, there were signs that more buyers were looking towards smaller, less expensive properties, with transaction volumes for flats holding up better than other property types.

Robert Gardner, Nationwide chief economist, says: “This may be because affordability for flats has held up relatively better as they experienced less of a price increase over the pandemic period. Average prices for flats have increase by 11.0 per cent since Q1 2020 – around half the 22.6 per cent increase for detached properties over the same period.

“However, in our most recent data, we have seen a convergence in the annual rate of price growth for different property types.

“During 2023, the price of semi-detached properties held up best, recording a 1.8 per cent year-on-year fall. Meanwhile, flats and terraced houses both saw a 2.1 per cent annual decline, while detached properties were the weakest performing with prices down 2.7 per cent over the year.”

Gardner’s comments came after he reported that UK house prices ended 2023 down 1.8 per cent compared with December 2022, leaving them almost 4.5 per cent below the all-time high recorded in late summer 2022.

The Nationwide also says there’s no prospect of a rapid recovery for the housing market in 2024 despite some green shoots appearing.

It says investors have become more optimistic that the Bank of England has already raised rates far enough to return inflation to target and will reduce rates in the years ahead. The Nationwide says this shift in view is important, as it has brought down longer-term interest rates, which underpin fixed mortgage rate pricing.