[00:00:00] Hey, I'm Andy and you're listening to the HMO podcast. Over 10 years ago, I set myself the challenge of building my own property portfolio. And what began as a short term investment plan soon became a long term commitment to change the way young people live together. I've now built several successful businesses.
[00:00:20] I've raised millions of pounds of investment and I've managed thousands of tenants. Join me and some very special guests to discover their tips, tricks, and hacks. The ups and the downs, the best practice and everything else you need to know. To start, scale and systemise your very own HMO portfolio. Now,
[00:00:40] In today's episode, I'm gonna put my head on the block and I'm gonna give you, I'm gonna share my best guesses for the property market in 2024. That's right. I'm gonna stick my neck out. I'm gonna share my thoughts on where I think property values and interest rates, and lots of other things that are gonna affect you and I as HMO property investors will end up across the year.
[00:00:59] So, without further ado, please sit back. Relax and enjoy today's episode of the HMO podcast.
[00:01:08] Hey guys, it's Andy here. We're going to be getting back to the podcast in just a moment, but before we do, I want to tell you very quickly about the HMO roadmap. Now, if you're serious about replacing your income, or perhaps you've already got a HMO portfolio that you want to scale up, then the HMO roadmap really is your one stop shop.
[00:01:24] Inside the roadmap, you'll find a full. 60 lesson course delivered by me, teaching you how to find more deals, how to fund more deals and raise private finance, how to refurbish great properties, how to fill them with great tenants that stay for longer and how to manage your properties and tenants for the future.
[00:01:39] We've also got guest workshops added every single month. We've got new videos added every single week about all sorts of topics. We've got downloadable resources, cheat sheets, and swipe files to help you. We've got case studies from guests and community members who are doing incredible projects that you can learn from.
[00:01:54] And we've also built an application just for you that allows you to appraise and evaluate your deals, stack them side by side, and track the key metrics that are most important to you. To find out more, head to thehmoroadmap.co.uk now and come and join our incredible community of HMO property investors.
[00:02:15] Okay.
[00:02:18] Welcome back. So today I am going to stick my neck out on the line. Like I said, I'm going to share my best guesses. For the property market in 2024, all the things that affect you and I as property investors, like inflation, like interest rates, like property values and other bits and pieces, like legislation, stuff that we know is coming, that is likely to have some sort of impact on the performance of our property business and our results in 2024.
[00:02:47] Now, I think this is going to be another very interesting year. I'm looking forward to a time or a year when things seem a lot more predictable. But what I'm going to do is start by actually sharing some of the experts opinions and predictions around property values to highlight the fact that, well, I think it'll give you a general idea as to what the overall consensus is in 2024.
[00:03:10] But then also show you some of the variability around those figures. So let's start with Nationwide. Nationwide are predicting that property values will be flat across the year. Rightmove are predicting property values will be down by 1 percent across the year. Halifax are predicting a drop of 2 percent. Zoopla, 2-4 percent drop.
[00:03:32] Savills are predicting a 3 percent drop. JLL are predicting a 3 percent drop across the year. Hamptons are predicting a similar 3 percent drop across the year. Frank really kind of erring on the pessimistic side. are estimating, predicting a negative 4 percent drop. And I think what we can take from that is that the general consensus is that property values are going to be down in 2024.
[00:03:58] There were a couple of resources, couple of people predicting some growth, but honestly, not particularly credible resources. I have picked the most credible. And that is not based on past performance by any means, but you understand what I'm saying. So there were some estimates and predictions for property values that looked more positive than these ones, but honestly, they weren't from particularly credible or relevant resources.
[00:04:22] So I've decided not to share them. Where do I think property values are going to end up this year? Well, actually, if we look at 2023, and I think this is important for us to look at, actual property prices came down by 1.2 percent according to the Office of National Statistics. Now, what we saw really was a price, a value correction.
[00:04:43] We didn't really see headline prices change that much, but what we did see was a value correction because whilst prices have come down a little bit, inflation continued to soar. And actually that discrepancy has essentially engineered a value correction. And I think that that probably looks more like 10%, something like that.
[00:05:03] That is interesting. And of course, it's worth bearing in mind that despite all of the uncertainty that we've had to deal with over the last 12 months and before that, the economy has fared reasonably well. Property market has remained quite resilient over the last 12 months. And I think there were many people, if we went back and looked at a lot of those expert predictions last year, that were much more pessimistic given what we were looking at having to face and all the challenges that we had to deal with.
[00:05:29] So I think that to be down just 1.2 percent across 2023 does demonstrate how resilient the property market is. And I think that bodes well going into 2024. Now, my best guess is actually that, and this is a bit boring, and I wish I had something more exciting to give you, but my best guess is actually that we will be flat to 1 percent in 2024.
[00:05:51] Now I'm going to come on and discuss this a little bit more, but I think what is really important here is that. Depending on where you are in the country, that figure may vary quite substantially. I think London is going to be down quite substantially. I think I can see London being down 5 percent and I can see some areas and parts of the country and some types of property, maybe in cities like Manchester and Birmingham, I can see growth being in the region of 5 percent in some areas.
[00:06:19] And there are a few reasons that I'm going to come on to that I think will help you understand why I think that that is the case, but my best guess for the year, and I suppose how I'm looking at appraising my deals and what I'm taking into account is that property values on average across the country will be flat to 1 percent up in 2024.
[00:06:40] Let's unpack this a little bit. And by doing that, what I'm going to give you and share with you is also my best guesses on inflation data and interest rates and rents as well. So let's look at inflation data. I think for you and I, it's issues like materials and energy costs, isn't it, that have been impacting us in our property businesses.
[00:06:56] It's been much more expensive to run our portfolios and to run our businesses. Inflation currently sits at 3.9%. My best guess is that by the end of 2025, we will get down to that 2 percent target. But what that means is we're not likely to see the dial shift significantly over the next 12 months. I think now we're going to be finding that it's tricky to shift that last bit of inflation to get it down to 3 percent and then get it down to the 2%.
[00:07:23] And I think that's going to take a couple of years. So I think by the end of 2024, I'd like to see us maybe a percent down, maybe 2.9%, around the 3 percent figure. I think that that would be quite, quite positive if that trend continued. Now that's good news for us because what it means is that things are not going up as quickly, but it doesn't mean that things are necessarily coming down in value.
[00:07:43] I do think some things are actually going to come down in relative value. I think there is a caveat here to what might happen elsewhere in the world, energy costs, some material costs like timber. I think we could see that the actual price of those does start to fall more. And that is obviously positive for you and I as property investors.
[00:08:00] We'll see that straight onto our bottom line. Interest rates then. Well, we know that things are now stabilizing and looking more positive because we've seen consumer rates start to drop. We've seen some price wars break out between interest between lenders. Haven't we? The base rate is currently at what 5.25%. So my best guess is by the end of 2024, we'll see the rate at 4.5%.
[00:08:24] I think Q2. Q3 and Q4, we'll see a drop of a quarter of a percent across those months, something like that, bringing us down to about four and a half percent. And I think that what that will mean is that the benchmark will be consumer rates sub four percent, maybe at four percent. which I think is pretty good.
[00:08:44] I'm doing the refinance right now and it's 5.4 percent and I think that's actually a pretty good product in the current market. That's 75 percent loans value on a six bed student HMO. So I think if we were to get to four and a half percent, seeing consumer rates at around 4 percent because the outlook continued to look positive.
[00:09:02] I think that would be a really positive thing. And I think that that is definitely going to help. And I think that's going to help install more positivity into the property market, which as you can see, I'll come on to, I think is an important factor this year. Okay, rents, rents were up by about 10 percent on average in 2023.
[00:09:20] Some areas better, some areas not quite so good, but that was the average. So my best guess is that we're going to see another 7 percent growth on average across the year in 2024. And there are a few reasons that I think that that is likely to be the case. New homes target still remains well below what the government are trying to achieve.
[00:09:39] So the supply has by no means increased, it's actually reduced and we've seen net inward migration. So actually the housing supply has naturally reduced. As a property investor, that is a positive for us because the demand for our properties is naturally going to be higher minimum wage, pensions and benefits are all going to go up in April of this year, but generally speaking, affordability has continued to be an issue for the average member of the public, and I think that that
[00:10:08] does limit people's options. And I think that that has increased the popularity of HMOs. And I think that that is definitely washing through. I'm going to continue to see that in 2024, I think basically because it's still more challenging to buy than it was a couple of years ago, more people are having to rent, it's pushing rents up, landlords have got the option.
[00:10:25] And in many cases, the necessity. To put rents up, to catch up their mortgage rates are going or coming off the fixed rate periods. So I do think rents are going to go up. My best guess is, like I said, 7 percent across 2024. Now, do I think that's going to happen in all areas of the country? No, absolutely not.
[00:10:43] I think in some locations that's going to be lower. And I think in some areas it's going to be higher, but I'd be very surprised to see any negative growth in rental values across the country whatsoever. So I think everywhere is going to experience positive growth, but some areas slightly more than others.
[00:11:00] So there we are. Those are my best guesses for 2024. Inflation down to about 2.9%, 3 percent by the end of 24, down to 2 percent by the end of 2025. Interest rates stabilizing to about four and a half percent by the end of 2024, meaning consumer rates would be benchmarked at around 4%, much more positive.
[00:11:20] Values, my best guess is flat to 1 percent up across the country in 2024. And rents, my best guess is up 7 percent on average across the country. So what does all of this mean? Well, it's important to think about all the things that are going on around us. We've got to be able to interpret this information.
[00:11:39] That in itself is not enough to start making decisions. There are risks. There's the possibility that my predictions and my best guesses and all of these experts, we could all be wrong. And it could look. Completely different. And depending on where you are and what you're investing in, in your personal circumstances, you need to take all the things into consideration.
[00:11:58] You've got to be able to assess your own risk and appraise your deals in the way that best suits you. And I think that that's so important. And in fact, has probably not been as important in the last six or seven years. So let's talk about some of the other things. that are going on at the minute that have the potential to change it.
[00:12:18] So to impact this either positively or negatively. Well, the first thing, as I've mentioned a couple of times already today, is that different assets are going to perform differently across the country. A lot of this data, we're talking about averages. Well, you can't buy the average and HMOs are certainly not the average.
[00:12:34] Actually, the average yield of HMO is better than the average yield of a standard buy to let, isn't it? So you need to think about that and take that into consideration. And I think if we really get. into the HMO market, I think the student market will probably continue to outperform because universities are still putting through a lot of people through that education process that is often government backed.
[00:12:57] That's a very stable resource. That's a very stable part of the property market, and that's attractive for investors. Investors will be prepared to pay more. That pushes the prices up a little bit. As I've already mentioned, I think rents are going up. So yields are naturally going up as well. That will drag the values up a little bit.
[00:13:15] So I think that a prime, really well located, good quality stock, particularly in the student market, will probably be some of the best performing properties in the market in 2024. Their essays are coming under fire. The essay market has been impacted a little bit. So we might find that those types of properties actually reduce in value more than other types.
[00:13:37] Professional HMOs in cities might do better than professional HMOs in subprime locations, small towns. And every small town is different. Every location's got its own infrastructure programs, its own problems. So. What I'm saying is you've got to really get into the micro. We can look at this macro data and the averages, but you've really got to get into the micro of what you're investing in, what and where, because that is going to influence the results that you see this year.
[00:14:03] So do take that into mind. I think there's still a lot of skepticism. I think the broad outlook, as highlighted by these expert predictions, the broad outlook for the property market this year is still quite pessimistic. I think if I took an average of that, it would be by down 2%. Some people think 4 percent down this year.
[00:14:23] I think we've got to recognize that that is important because when there is a negative outlook, it gets reported on in a negative way. And that, of course, can be, call myself, fulfilling prophecy, right? Certainly when we look at things like recession or downturns in property values, a big part of it is often driven by sentiment, isn't it?
[00:14:41] People watch and wait to see what other people are doing. So the market can stall and property values can retract. So I think that that is something that we want to keep an eye on. Now, the news isn't necessarily the resource to utilize when it comes to making decisions on, but the general consensus about the direction of travel is important.
[00:15:00] We do see that that influences the property market and values at the end of the day. So I think that that is an important point to keep in consideration. GDP. GDP is flat at the minute. We are very much just sort of like scumbling along the bottom here. And there's still a good chance that we could go into negative growth as an economy and then fall into a recession.
[00:15:24] Let's be honest, there's still millions of people who are on their low rate fixed term mortgages that are going to come to the end of them and have to revert to much more expensive mortgage products. Very quickly, their spend ability is going to come down, isn't it? When people spend less, businesses are impacted, and then you have that knock on effect.
[00:15:42] That is one of the reasons, and one of the things that happens in a recession. So by no means are we out of the woods yet, just because we've done okay so far in the last 12 months, last 18 months, doesn't necessarily mean we're going to be fine in the next 12 months. That's definitely something to keep in consideration, to keep in mind at the very least, there are a couple of other things that have the potential to impact what happens here in the UK and the property market.
[00:16:05] One of those is the general election. We're almost definitely going to have a general election this year, that uncertainty. Can spook the markets and it can leave people waiting to make decisions that in itself can drag things like property values down. We've also got a US election this year and whether we like it or not, what happens in the US does tend to affect what happens here as well.
[00:16:27] Then of course, we've got. What's happening over and Ukraine and the Russo Ukrainian war, and now the Middle Eastern tensions, which are brewing away, these all very much have the ability to impact what happens here economically. And at the end of the day, property values and people's opinions of things like investment returns and interest rates, inflation, that does ultimately wash through and affect things like property prices.
[00:16:52] So nothing you or I can do about that, but worth keeping in mind at the very least. Now, the last thing worth mentioning is some of the changes to legislation that we're expecting to come to fruition this year. The renters reform bill, they've been banging on about it for ages, it's working its way through parliament now.
[00:17:08] We know that it is going to come into law, one of the big ones is the abolition of section 21s. Well, the Conservative Party have said that they will reform the court system before they introduce that and some of the other proposals. Labour, on the other hand, have said on day one they would just put it into play without reformation of the court system.
[00:17:27] So look, there are changes afoot. I think we've all now got our heads around what those changes are, but the speed at which some of those changes could come about may impact people's opinions on the property market. Last year we did see a large Exodus of landlords from the market. And a big part of that was all of this unknown wasn't it?
[00:17:45] It was the renter's reform bill and they still were sort of banging on about EPCs and getting to the grade C and all of this stuff. And actually a lot of the dust has settled on that now. And I think we as landlords know much more so than we did 12 months ago, where we stand with buy-to-let at the minute.
[00:18:02] We could very well see tax changes as well. I think it's become pretty clear now, hasn't it, that changes to things like interest rate relief, some of the penalties that they imposed on landlords several years ago, have started to wash through and have created this rental supply crisis, which a conservative government trying to stay in power may well propose to reverse.
[00:18:22] And so let's just see, but there's no doubt that while some elements Of what we've discussed today, look a little bit more predictable, but there's a whole lot here that is very unpredictable. And that just doesn't make for the easiest environment to invest in. And it also doesn't make it easy to answer the question, look, is 2024 going to be a better year for property investors than 2023.
[00:18:46] So let me try and summarise my thoughts on all of this. I've given you my predictions, so you know where I stand with this. I'm very much still in buy and growth mode, and I think 2024 could be a really good year for that. I think taking advantage of some of the hesitancy in the market, or that broad pessimistic outlook, I think this is a good opportunity to take advantage of that.
[00:19:07] But you've got to be especially careful when you're buying. You've got to make sure that you are absolutely engineering the methods of adding value. Buying at good price, not a price that reflects the fact that property values have come down a little bit. I mean, genuinely buying at good value, looking for discounts, buying properties that have the opportunities to maybe do the lofts, convert the garage, those very easy value add opportunities.
[00:19:32] And if you can find those needles in the haystack, I think you'll do very well this year. But I do think you've got to be careful. I think just because things look a little bit more predictable in some ways. Doesn't mean that we can just assume that things will be hunky dory at the end of the year. And I think building a contingency around that is a really sensible thing to do.
[00:19:52] So whilst I am very much in buy mode at the minute and trying to take advantage of some of this stuff, I'm very much covering the downside. Cash in the bank, not overexposing myself, extending some of my loan agreements with private investors, just building in those sorts of contingencies so that. If there are any issues here, and let's face it, there are potential issues here, it wouldn't be completely disastrous.
[00:20:16] So I would very much recommend you take that into account as well. So there you go, guys. You've had my predictions. You've had my thoughts on how to interpret all this. And I guess it's over to you. Look, I think to remember is that I'm not an expert in economics by any means whatsoever. And I'm investing in potentially different types of properties in different locations to you.
[00:20:35] And you have to take all of this information and you have to, as best as possible, build your plan around that and what the impacts of all of this and the opportunities look like. Few. That I think is the most important thing when we're looking at any data, listening to me or anybody else talk about all of this stuff and offer predictions, you have to make your own.
[00:20:55] You've got to come to your own best assessment of what's going on, where you invest in the types of property and the type of market that you invest in. So there we go, guys. That's it for today's episode. If you want to come and discuss any of this, if you've got some of your own opinions, if you want to ask some extra questions on this, you can have a discussion about anything that I've talked about in today's episode, come on over to the HMO community.
[00:21:18] That is the place to ask your questions. That's the place to get your questions answered. With over 8,000 of us now, it really is a fantastic. community of HMO property investors. It's our free groups on Facebook. So do come and check it out if you haven't already joined. Of course, if this is the year you want to level things up, then make sure you go and check out thehmoroadmap.co.uk.
[00:21:34] We currently have a 20 percent sale on. This is not going to last. So if you want to get in now while you can at the best price we've ever offered everything inside the HMO roadmap, go and check that out. thehmoroadmap.co.uk. And of course, don't forget that I'll be right back here in the very same place next week, so please join me then for another installment of the HMO podcast.