Industry insiders tell us what’s REALLY happening in the market

0:01Hey everyone, it's Rob B here with Rob D and you are listening to the Property Podcast. This week we're taking you behind the scenes of what is actually happening in the property market. We have conversations day in, day out with multiple parties in our industry and we get ahead of the curve and we share that with you and that's exactly what we're going to do today. We're going to share information with you that is not being discussed elsewhere but not only that you'll find super interesting but that you can take full advantage of.

0:33welcome to the property podcast thank you for listening in case you don't know we run a business that buys more than 100 million pounds worth of property every year for our clients you can find out about that at propertyhub.net slash invest and today we're taking all the knowledge that we get from doing that packaging it all up and delivering it to you it's time for our news story of the week now and this news story comes from hamptons and they've put some really interesting data together in this press release and the headline reads the next generation of landlord emerges. What's the next generation?

1:01Well, millennials. Those born between 1981 and 1996, yes, fall into that category. Very happy, as does Mr. D. And apparently, we millennials now make up half of buy-to-let purchases through limited companies. For the first time ever, it's gone through that threshold of 50%. Now, this is great news, and it's showing that there is a generational shift within landlords but what's possibly a little misleading or at least not clear from this article is that landlords buying through a limited company are still the minority of the overall picture of ByteLets because what we have is a lot of legacy landlords, landlords who've been in the game for a long time, who've bought through their own name and the majority of ByteLets in the UK are held that way but the new wave of investors coming through now are millennials and they understandably buy with limited companies so it's interesting to see that there's this slow shift within the market of the new type of investor coming in a lot of people when they think of landlords they think of a more mature individual and now it shows that at least with new purchases it's a younger demographic coming through which i think's great for the industry and of course i'm a little bit biased because i fall into this category another piece of interesting insight from this news report is that the percentage of buy-to-lets purchased is pretty much the same as this time last year so of the overall makeup of buy-to-let purchases the percentage of all transactions has remained steady from 12 months ago and if you want to know what that percentage is?

2:41Well, it's 11.2%. And that's held firm for the last 12 months. So landlords, investors, despite all the negativity, despite all the doom and gloom out there, are just consistently getting on with things. And I know many of you are doing exactly the same. The sentiment may be awful, but the opportunities, as we've highlighted on this very show, are arguably the best they've been for many, many years. A property of Invest, we're honestly breaking records with the discounts that we're achieving at the moment. It's absolutely fantastic. The property market's not crashing, it's just that sentiment is low.

3:15And with such low sentiment, if you're in the market right now, you should absolutely be getting yourself a great deal. Doing average in this market is really an injustice to yourself. So if you're actively looking to get a buy to let in the next few months, remind yourself you need to be getting yourself an incredible deal, because incredible deals are out there right now. Not in all markets, but in this market, it's absolutely possible. As we always say at the top of the show, we have a business that arranges hundreds of property deals every year for investors. And the big advantage of that from your point of view as a listener of this podcast is that we can bring you insights from that that you're pretty much not going to see anywhere else because we've got a team of people out there talking to developers of all sizes every day of the week.

4:00And they're telling us things that they're not talking about in the media. Yeah, and because we're speaking to so many people, we can spot patterns that will allow you to potentially get you a little bit ahead of what's happening. See round that next corner. So that's what we're going to do in this episode. We're going to share some patterns that we're seeing from all the conversations that we've been happening to get you closer to what's really happening in the market. And most importantly, tell you how you can take advantage of that. I love these episodes, Rob. We haven't done many of them, but it's really taking people behind the scenes of what is actually happening in the market.

4:28because the media reports that you are reading are often led by PR agencies, PR companies trying to get a message across that they want to deliver. All the news, to us at least, seems lagging because data is needed to back up what actually has been happening on the ground for months and months. So let's get you all ahead. Let's put you ahead of the industry. And the first big insider share that we have for you is that the big boys, the big developers, the ones that you've all heard of and can name, they're all having a tough time at the moment and why is that well let's face it the market is flat as a pancake the data shows us that the amount of transactions property prices all of it sentiment isn't great it's not crashing it's not collapsing it's not even falling but it's not a great market for developers because people aren't feeling particularly optimistic at the moment they haven't seemingly got the confidence to go out and buy new homes another reason why they've been impacted and this has been for a long time now is help to buy disappeared so when help to buy disappeared that was a really easy way for them to just feed buyers in week in week out to all their developments and that has gone as well now what does that mean what does that mean to you listening or others in the industry listening well the key thing is to remember is these developers don't just stop in a difficult market so we're going to talk about mid-sized developers later in the episode.

5:54They can just stop. They wait for better conditions. But big developers, particularly those who are listed on the stock exchange, they will say, okay, we're going to deliver this amount of revenue or this amount of units this year. And if they miss those numbers, their share price will get hammered. And that means bonuses disappeared. So they can't just go, oh, it's tough. So let's stop. They have to do deals. That's the key word, deals. And that's we've been taking advantage of at Property Hub Invest. And don't get me wrong, they're keen to work with us because we have investors who are super serious, who will take action, and that's been happening all year.

6:31And it's not just getting good discounts, it's having the choice of areas. And even recently, and this is gone now, so this isn't saying come and buy this, even recently, we had a deal where we structured a 5 % deposit. I don't ever remember doing a 5 % deposit before, Rob, never with a big developer anyway. And that is something we've been able to achieve because we've said, okay, how can we structure a deal that's super attractive to our investors and still works for you and been able to do that? It's not being reported anywhere in any meaningful way at the moment. There may be, if you search for it, a little bit of news out there, but they are all, and I mean all, without exception, struggling.

7:11The only region in England that seems to be more resilient than others at the moment for these developers is the Northwest. The Northwest, they need less help. They don't put as many calls in to us for those regions. Still do deals there, but it's harder to do deals there. But the rest of the country, it seems really easy to do a deal. And so much so that we're turning the vast majority of stuff down because we can't do it all. And what does this mean? Well, one, if you work in one of these developers, don't worry, you're not alone your competition might be telling you they're flying but they're not you're all in the same boat and if you're an investor well great use if you want to get a deal done go into one of these show homes and start negotiating i'm pretty sure you'll be able to get a deal yes we do it our company does it but we share this so you don't have to work with us it's only if you choose to work with us so there's deals to be done at the moment the market is not a bad market it's just a flat market.

8:07And actually, we've talked about this on the pod over the last few months. It's a great environment for doing deals. I think it's really important to know because as with so many things, timing is everything. And there've certainly been times in recent memory when by walking into a developer's sales office and trying to do a deal, you would have been completely wasting your time and energy because it's just not going to happen. Even for us, there was a time like that. So I I remember in 2021, 22, when everything was absolutely flying, we were having conversations about the deals that we were looking at.

8:38And this whole segment of the market just stopped talking to us basically, because why would they sell to us at a discount when they can sell to other buyers at full price? So not blaming them makes complete sense. And we were just not getting anywhere with them. And so as an individual, nor would you. But now because you know about that dynamic, you know that you can go in there in a strong position. But what I think is interesting, Rob, is that these big house builders, they make up a huge proportion of everything that's built in this country. We know that we need more to be built. The government has got a target about how much they want to be built.

9:09But if they're struggling to sell what they're building, then it's not going to happen. They're not going to get aggressive about their volume. So does this mean if you're sitting in government responsible for that target, bringing back something like help to buy, it's going to start looking like an attractive option? It could, Rob. And you make a really good point. They're not building for the government, even though the government wants them to build. They're building for their shareholders and they can try and manage their shareholders' expectations over the next few years. Every time they release numbers, they can slowly reduce it, go in the wrong way.

9:39They're not building enough for the government right now, but it's going the wrong way if that continues. And sentiment's a funny thing. It can sometimes dramatically turn around if there's an event, if something happens and suddenly everyone feels more bullish about the property market. And it's not just a property market thing. it's really important to stress this is a uk thing the whole economy everything's a bit flat at the moment people aren't bullish so it takes time but the cambides triggers that sometimes rapidly turn things around now that could be some aggressive cuts in interest rates doesn't look like it's going to happen in the next few months but it could happen next year i'm not saying it will i'm just saying it could before people start getting angry in the comments and as you've just suggested help to buy that was a guaranteed sales machine for these developers and if that came back in they would certainly be a lot stronger and we know that people in the government listen to this and we also know that the developers will be lobbying the government to get something like help to buy back in and we also know there's a budget coming up i've not heard any rumors of it returning but there's often some surprises in the budget so who knows there might be an event that changes things for these developers and it all goes back to normal and then deals are hard to do again so the point is for you as the investor listening to this take advantage of the situation there are deals to be done we're doing it we're taking great advantage of it i don't feel sorry for the developers and i know they they very much listen to this podcast they want to do deals with us we're helping them out so it's a win-win but we are getting better deals from them than we have done for a long long time and long for us anyway may that continue but the big national developers aren't the only one we're talking to so let's move along and talk about a different category of developer so this is far from universal but just to help give you a picture when you see suburban style new build developments that tends to be the national developers but when you're thinking city center schemes modern apartment blocks more dense kind of housing into the city that tends to be more mid-sized regional developers.

11:42Now it's a giant oversimplification, there are loads of exceptions, but it's just to try to paint a picture of the distinction we're making here. And these developers have a different set of concerns. Yes, some of the same dynamics are at play. And the main thing that's on these developers' mind at the moment is something that there's been very little about in the press. There has been the odd news story, but this is actually a really big deal that is completely under-reported, I think. And that is the building safety regime, or something called the gateway system. So this is something that originally came out of the Grenfell tragedy.

12:13So it's focused on higher risk buildings which tends to be buildings that are larger and higher and obviously if you're building in city centres you tend to be building higher. And this is basically a new approval process that has come in that plans need to pass through before construction can begin. Now prepare not to fall off your chair here but what appears to have happened is that the government has created a new regulator, put it in place and then not really resourced it properly or empowered them to make decisions. So the result of that is that apparently only about 10 % of submissions are being approved, which means if they're not approved, they need to go back, make changes and come back again.

12:47And the whole thing is massively backlogged and it takes forever. So what does this all mean for construction in city centres? Well, according to some research from Knight Frank, there are currently 6 ,600 homes that are stuck. So they've got planning approval, they want to start building them, but then they are in some stage of stuck. They can't get on with them because of these gateway checks. And obviously, because this is the case, it will also apply to anything new that goes into the process, which means developers are holding back. They're putting in fewer planning applications and there's less demand for land.

13:16It's also putting them under a lot of pressure because these checks, according to this research, are adding 12 months or more to project timelines. If you've got a project on the go, maybe you've got finance, you've at the very least got a lot of capital tied up. An extra 12 months on the timeline, that's really going to hurt. So Rob, like I said, this is a really big deal, bigger than is being reported. It's very painful for those developers, but what are the implications for investors? Let's start with the macro, and that is a supply issue. This is a massive supply issue, and our third insight is going to help you understand it's going to exacerbate that further.

13:50But before we get to it, let's just deal with this. These developers are super important. The government we've talked about already has these targets to hit, and with all these developers just pausing because they can, because they just wait for the right opportunities. You've got a situation building where stuff that's already on the way will be complete, and then there's going to be a gap. Nothing will be getting complete, or very little anyway, because there's just not much coming through. And what happens when you have a city that craves more homes, because they do, these growing cities like London, Manchester, Leeds, Birmingham, etc., they desperately need more homes.

14:28People always go, is there too much going in no there's not enough and that pressure will then suddenly mean that rents will push up because there's no stock in those areas it's gradual right it's going to take time for this to play out but it will play out because it takes time to build these properties but then it also has an upward pressure on prices as well which eventually then will give the developers even more confidence to come back into the market now what i'm seeing is developers starting to feel a little bit better at the situation because some developers have been brave enough to go through this system and while some have had a really tough time they absolutely have some have been successful and then there's almost a blueprint of what they need to do to get through this process homes england as well you know are an important organization in this and homes england is a government body but they want to see homes built as well that's kind of their remit amongst other things and they are really trying to help and support these developers to start building again so it's a really interesting dynamic because we desperately need homes built the government has targets for that but where they are needed most is not so much the semi-rural areas but actually the cities that needs to be everywhere but the cities are the places that are hardest to build there's not as much land there so it's always required and it's not happening so it's a really interesting dynamic of play but there are the first green shoots of that starting to change and i mean the first green shoots just like a few developers we're speaking to right now who are interested in building and remember it takes time for them to go through planning so they can't start selling tomorrow if they decide today that they want to start building again it's going to be a next year thing but when they start when they all start to get confidence again it will mean that they'll pretty much all start coming to the market at the same time and then there are deal opportunities to be done again because not that many owner occupiers are going to be willing to buy off plan so it's either institutions which we'll come to or individuals who are not as emotional about what they're buying and just see it as an investment property investors so it's a really interesting dynamic from a city point of view from what's happening of the stock there the pressures that it will have on rents and an upwards direction the pressures that it will have on capital growth in an upwards direction but also a deal opportunity short-lived but a deal opportunity when they start to come to market at the same time which i predict will be next year and probably mid to late next year you'll start to see this happening but we are speaking to developers now who are keen to get building again and are starting to go through that process but they are the early birds they are not the norm but where i think will happen is more will follow it's fascinating rob like this is not discussed but it to me anyway is a bit of a geek it's fascinating how big this issue is how pretty much all these developers have just stopped and nobody is talking about it it is fascinating again to me at least hopefully to our listeners as well because they've chosen to be here for the geeky property stuff but it's not just interesting there's also as we've said there are things that you can do with these insights and we'll wrap this all up at the end but first there is another segment of the market that we haven't talked about yet which is the build to rent sector and this is a sector that was booming when we round up the news stories for our weekly newsletter it's free by the way you can sign up for it at propertyhub.net slash pulse it felt like every few weeks there was a new story about just how many schemes were being built how well it was all doing how many billions were being poured into this sector but again not really talked about much and i didn't understand the scale of this until we saw report a couple of weeks ago that has come to an end and the rate of growth in the sector has come way way way down so whereas in 2022 23 in a typical quarter you'd have more than 5 000 completions so more than 5 000 new rental units coming into existence the third quarter of this year there were just a thousand so that's a huge decline and if you look at the future pipeline very limited sign of that changing so why is that the case because they're in a different boat from the big nationals that we started talking about they're not constrained by people's ability to buy because they're not selling them and the rental market is doing really really well so why would they not be building more well there's a whole load of factors the building safety point they would all get caught up in as well but i think the big ones here are just how the costs have gone up so obviously compared to 2022 their borrowing costs are going to be much much higher which means schemes just aren't going to be viable in the same way and also construction costs that's something we haven't talked about that affects every part of the market but over the last few years they've clearly gone up enormously.

19:09So the implication here Rob from an investor's point of view isn't to do with pricing so much as rents. This is going to put more upward pressure on city centre rents because there's just less supply. We know the population of all major cities is growing we know that the city centre is back the race for space is over it's reversing all data sources are showing people coming back to live in cities again and the rental supply is just not there. It's not there because developers aren't able to get their stuff built and it's not there because the build-to-rent sector, which was adding a big chunk of supply, isn't anymore.

19:41It's going to be really interesting to see what happens with rents because rents have continued to grow but the pace of that growth has fallen away. But with these dynamics in place that we've talked about today on the podcast, I think it's reasonable to expect rents to continue to be strong and may even start to push up again once the supply issue comes through into the market. It's a bit early for us to be making our 2026 predictions, but at the moment, when we come to predict rents for next year, I think my number is going to be quite a strong number. So besides rents potentially pushing in an upwards direction, particularly in city centres, and developers having a hard time of it, what else can you take away from this pod?

20:26Well, clearly there's an opportunity to do deals, said already but then just listen and go oh yeah yeah deals I must do that and then crack on with your life because that's the easy thing to do right life gets in the way of your investments because investments take time and effort and dedication but the opportunities are there and the market's not a bad market it's a bad market for some of the parties involved as we've discussed but for an investor you get really strong deals at the moment and nobody's predicting a market crash and nobody's predicting even a market fall it's just that it's probably going to carry on for a while before things change but that time will change but the opportunity is now you're working in a market where there's not as much competition and there are parties out there who want to sell and therefore deals can be achieved so whether you do it with us or yourself as i said we tell you this so you have the opportunity to do it yourself property of invest exists for those who don't want to do it themselves who don't have the time to it's for time poor individuals if you have the time take advantage of this free information this knowledge that i don't think is shared anywhere else because who wants to share this developers aren't going to tell you this so it's a really really interesting market on multiple levels but rather than it just be an interesting market report for you use this information and take advantage of it okay so hopefully you found that interesting and useful but let's see if we can fit in something else interesting and useful before the end of the show in the form of Hub Extra.

21:54And Rob, I believe you've got something for us this week. I have. And it's a really cool feature of an app that I'm sure many of you use. But if not, the app is the first thing to mention on Hub Extra. I'm sure many, many, many years ago we have mentioned this. But the app I'm referring to is FlightRadar24. And what that app allows you to do is track flights. So if you are waiting for a flight, you can track that as it comes into an airport. or if you're waiting to pick someone up from an airport, you can track that flight. And the apps have always been cool. One of my bugbears with it, though, is after you've left the app, you go back in.

22:29Often you need to research for the flight. Bit of a faff, not the end of the world. But every time you go and check, you need to put all the details back in again. Well, there's a feature that I discovered in the last week, which is really cool, which is the live updates feature. So if you sign up for an account, which is completely free, then you can use this live updates feature. now i know this exists on iphones i would be surprised if there isn't a version of it on android phones but iphone now allows apps to share a live update with whatever they're doing it's a widget and it could just be temporary so if you're waiting for an uber or you've ordered some food or anything like that it can be on your home screen and you can now do the same for flight so i was waiting to pick someone up for a flight and i was able to just leave it on my home screen not having to go back in it it feels like a small thing but it's a really cool feature and you can see the progress bar which is actually quite satisfying to watch as it comes in i can imagine i'll be using the next time i get a flight waiting for my flight to land keeping an eye on it that's you know a good way to know you know where you should be at the airport on that journey it's just it's free to use the app itself is cool but this makes it like really cool a great little feature well worth checking out i'm trying to work out this is something i should tell my wife about or not because she's always super scared about missing a flight so she wants to be at the gate as soon as it opens just in case whereas I want to hang back and just be in the lounge relaxing so this will either empower her with the information she needs to be a bit more relaxed or it's going to send her into overdrive I don't know which but maybe I'll take the risk and report back that is us done for another week thank you so much for listening I hope you found this useful remember you can sign up for our newsletter that's where we bring you all the important news you need to know every week it's completely free you can sign up for that at propertyhub.net slash pulse and beyond that we'll see you back here on the podcast next week have a great week bye-bye bye-bye