Gazumping in the North – how prevalent is it and what do property investors need to know?

Gazumping has emerged as a clear issue for buyers in the current property market. With investors chasing limited supply, the likelihood of seeing a rival bidder swoop in with a larger offer – after a deal has already been agreed – is high. Sellers have the upper hand and in England and Wales, where gazumping is legal, and they appear happy to take advantage of their position.

To analyse the prevalence of gazumping, MFS conducted research in April, surveying 2,000 UK adults. Of those surveyed, 524 had bought a property in England or Wales since 2012. Just over 30% of these buyers had been gazumped by rival bidders, and 79% feared gazumping tactics became more common in recent years due to fierce levels of competition.

Regionally, buyers in London and the surrounding areas face the highest levels of danger from gazumping but, other hotspots have also come to light. In the North-East and North-West of England, where economic powerhouses such as Manchester, Liverpool and Newcastle reside, competition is proving tricky to manage.

In the North-West, 54% of respondents said they would consider gazumping a rival if it meant they got the property they wanted, the highest amount seen outside of the capital. A more mixed bag was found in the North-East. In this part of the country, 36% admitted to gazundering a seller, which involves lowering an offer late in the buying process. On the flipside of this however, only 57% believed the property market to be too competitive – the lowest result across all regions.

When looking at the local economies up north, it’s clear to see why competition among some buyers is at a fever pitch, while others think there’s still room to grow.

What’s going on up north?

House prices across the north have risen substantially over the past 12 months or so – rising higher than what’s been seen in London. House prices in the North-East rose by 9.7% in the year to May 2022. In the North-West, prices shot up by 11.5%, while Yorkshire and The Humber saw hikes of 12.6%.

Given these rises, coupled with relative affordability in the region, it’s no wonder buyers may be keen to look up north. New data from Halifax found the North-East ranked as the most affordable region for home buyers, with an average house price of £162,692 and a house price to income ratio of 4.6. For comparison, in London, the average property costs more than £500,000, with a house price to earnings ratio of 9.7.

There is also plenty of rental demand too. Northern cities are proving popular with renting retirees, downsizers and families who may be looking to escape the costs of the South. For investors, this demand could prove especially lucrative.

Northern rental yields are providing decent returns for landlords. The North-East, North-West, and Yorkshire & Humberside, are seeing the highest return levels, according to Fleet Mortgages. The North-East of England had the top regional yield for the eighth consecutive quarter in Q1 2022, at 8.3%.

Also, northern holiday-let investors could do particularly well if they know where to look. The number of holiday-let homes in England has risen by 40% in three years. Specifically, the seaside resort of Scarborough has seen the biggest rise, jumping from 2,032 in 2018 to 2,913 in 2021. Getting in on this action could be worthwhile, considering average holiday-lets can earn over 10% in rental yields during peak seasons, according to Buy Association.

Source: The Times, ONS, Yahoo Finance, Property Reporter, BBC, Buy Association

Is there still room for these local economies to grow?

There’s still plenty of room to grow for Northern investors. The economic outlook for the North looks bright, with plenty of investment on the horizon.

The North-East of England recently topped the list of UK regions for new job creation from inward investment between April 2021 to March 2022; boosted by the electrification and technology sectors. The Department for International Trade also found that direct investments and expansion projects from foreign-owned companies across the North-East LEP area attracted 5,495 new jobs during the same period. This was the highest number seen in any area outside of London.

Additionally, as part of the Government’s £1bn investment in levelling up education, the next round of funding will be issued to schools in the North. Meanwhile, the Northern Powerhouse tech sector also recently won a £45m investment to be spread across Manchester and Newcastle.

The North has plenty to offer the wider population. Whether they’re looking for a place to raise a family, take advantage of strong local economies, or simply cut their living costs. With positive days ahead, gazumping in this region could become even more intense over the coming months as demand rises.

Fortunately, specialised finance can help investors get ahead of this. Our bridging loans can be issued in mere days, lowering the chances of rival bidders swooping in at the last minute, while our buy-to-let mortgages can get the ball rolling for aspiring landlords.

All our products are flexible and tailored to the client. No matter how complicated your plans, or how imperfect your financial background may be, we’ll do everything we can to issue funding and keep your investment goals alive.

Source: Insider Media Limited, Gov.uk, Department for Education