Yorkshire’s buy-to-let market has seen landlords enthusiastically invest for years. Bruce Collinson’s estate agency, a reputable name in Leeds, has observed this trend closely. But the past few months have shown a significant exodus of landlords from this market.

Several factors have contributed to this shift:

• Rising Interest Rates: The increasing cost of borrowing, owing to the surge in interest rates, has turned what was a profitable investment into a financial burden for many.
• Regulatory Changes: The withdrawal of mortgage interest tax relief combined with the reduction in the capital gains tax allowance in recent years has added extra financial strain on landlords.

Collinson, a consultant and chartered surveyor at Leeds estate agent Adair Paxton, notes that these combined pressures have led to a large number of landlords selling their properties.

Impact on the Rental Market and Tenants

With more landlords leaving the market, the number of available homes for rent has decreased. This reduction in supply, when combined with the ever-growing demand for rental properties, has led to a significant spike in rents. Consequently, many tenants face increased financial stress, and younger individuals often find themselves returning to their parental homes.

The Dual Reality of Yorkshire’s Property Market

While the rental market faces challenges, the sales market presents a contrasting picture.

In the prosperous parts of Yorkshire, often referred to as the “golden triangle” encompassing Harrogate, York, and north Leeds, the property market remains resilient. This region, popular among professionals and self-made millionaires, boasts property prices ranging from £400,000 to £1m for upscale homes. Collinson observes no decline in this segment.

However, for mid- to lower-priced homes, the market dynamics have shifted. Declining volumes and values predominantly result from reduced affordability, primarily due to the hike in mortgage interest rates.

Bank of England’s Strategy & Market Predictions

The Bank of England, in its effort to control inflation, has consistently raised interest rates. By the latest count, rates have seen a rise 14 times since the close of 2021 and currently stand at 5.25%. Economists have presented two potential future scenarios:

• The Matterhorn Scenario: A rapid and steep increase in interest rates, aimed at curtailing inflation swiftly. This approach, however, could induce a recession, necessitating subsequent rapid rate cuts.
• The Table Mountain Scenario: A more consistent squeeze where interest rates remain at their peak for an extended duration.

The prevailing sentiment suggests that the Bank is favouring the ‘Table Mountain’ approach. Collinson believes a more moderated approach, where rates gradually ease back from their highs, would be beneficial for the economy.

The Path Ahead for Yorkshire’s Property Market

Looking back, the early parts of the year witnessed the usual spring market buzz. Yet, by mid-year, heightened inflation and base rate concerns had significantly slowed activity.

Collinson, however, notes an uptick in recent inquiries. As customers navigate these tumultuous times, they seem to be reaching a consensus. The belief is that interest rates may be nearing their peak, leading many to consider their next steps – whether that’s moving, trading up, or downsizing.