Welcome to Q4 of one of the more challenging years of recent times. For finding deals? No, not at all - especially when compared to the white-hot markets of 2021 and 2022, and the somewhat closed market of Q2 2020 onwards! For finding deals that stack up? If you, like me, use leverage as part of your business model, then yes - absolutely. The state of the market at the moment is that the cash buyer, who can also afford to be relaxed about a refinancing schedule, has a much larger competitive advantage over the leveraged buyer than they have done for certainly 10 years, if not 15 years. Cheap bridging was a large part of how I was able to scale such a comparatively large number of units so quickly, and those days are ebbing away - alongside a reasonably swift refinancing schedule, which is much tougher to adhere to these days due to massive changes in lead times for offers and remortgage completions.

You could read that and think “what’s the point”! Well, I can give you a couple of really valid ones. Firstly, the sector is struggling to grow, and has shrunk in the past 5-6 years. Anecdotally there’s still plenty of landlords selling up, and from a data perspective the amount of buy to let mortgages taken out has not been this low, from a percentage perspective, for over 13 years. Mortgaged buyers are down significantly. This is a classic down market at the moment - instead of prices really trending downwards, what happens instead is that volume contracts significantly. Since 2021, which saw a massive uptick in volume that was largely sustained during 2022 - mostly due to the fact that there was the largest reason to move in a generation due to the proliferation of working from home - volumes have “collapsed” - but collapsed to just under normal. A functional market without significant incident (remember one of those? You have to go back a few years) expects around 1.1-1.2m transactions per year, whereas 2021 saw nearly 1.5m. 2023 is expected to see more like 1m, or about 20% down on normal, and 25% down on the 2022 number.

This compares relatively favourably with the 850k transactions seen in 2009, and also with the fact that it took until 2013 until that number came back above 1m, and 2014 was the first year where transactions started to look “normal” again. The interest rate saga is by no means over, although the probability that we’ve hit the peak in the UK 5-year gilts and swaps markets, from which the mortgage rates are all priced, is high. Mortgage rates are trending back down, although they are coming back from a significant level. All of that is a pretty good yardstick for how much pain (or not) the market has really taken. 

We can go a little further, as well. When the market data is stratified area-by-area, or price-by-price, which can be a similar piece of analysis, the areas that are struggling are in the south, and the price bands that are struggling in particular are the 300k+ houses (hence the correlation). The south west has cooled significantly - but, it had the furthest to go since at points over the past two and a half years it was the hottest market for sustained periods of time. Nothing too surprising. As offices have pushed for at least partial returns-to-work, that move from zone 2 right out to Cornwall might not look quite as smart as it did in early 2021, for example.