Lomond Quarterly Insight Spring 2024

Lomond Quarterly Insight

Content

Introduction

Ed Phillips, Group Chief Executive

National sales

Window of opportunity

Economy | Increased activity | Stable investment

National lettings

Significant potential for investors

Rents at all-time high | Strong returns | Fastest-growing areas

Scotland

Strong long-term investment

Good asset class | Average 10-year growth | Supply shortage

Yorkshire

Opportunities for investors

Rental demand strong | Yields | Good time to sell

Manchester and the North West

Unique market conditions

Investors return | Hotspots | Strong start

West Midlands

Rapidly transforming

Reframing | Focus cities | Sales

South Coast

Something for everyone

Good time to invest | Broadening scope | Heading West | Options

Lomond Investment Management

All-in-one solution | Nationwide reach | Awareness

Lomond property services

Property wisdom to help businesses

Land and New Homes | Conveyancing | Investment Management | Mortgage Services

53 acquisitions in three years

Recent additions to the Group strengthen our presence in key markets

Always on the move

Mission

Our mission at Lomond is to build a national network of local agents in towns and cities across the UK by acquiring businesses that excel in their own markets. It is an exciting journey and I am proud to say that, in just three years, we have acquired more than 50 high-performing local businesses. Hitting the 50 milestone was quite a moment for our team but we didn’t linger long and already the total is 53.

But this is not simply a numbers game. This is about creating a family of businesses where the whole is greater than the sum of the parts. Every one of the businesses we welcome into the Group brings with it a strong track record in their local market and an understanding that being part of a national network will strengthen their local offering. Being part Lomond means access to best-in-class technology and unparalleled staff benefits and training to retain, reward and future-proof our talent pool.

Latest news

In January we announced the acquisition of Beals, a leading Hampshire agency with a 30-year history of delivering a premium

Over 8,000 homes now in our Midlands lettings portfolio

service. With ten offices including Southampton and Portsmouth, it opens up a new territory for Lomond and extends our coverage of the South Coast to a 75-mile stretch.

Our lettings portfolio has been further strengthened by the acquisition of Nottingham-based Tassi, taking our Midlands book to over 8,000 homes. The UK rental market is evolving fast as more institutional landlords enter the sector. Lomond is committed to operating at the highest standards as witnessed by the growing number of blue-chip investors instructing us to let and manage their investment portfolio.

All this is against the backdrop of a more confident housing market as buyers and sellers look forward to a cut in interest rates. The prospect of a General Election would ordinarily create uncertainty but the mood-music from the housing market suggests that this one is a foregone conclusion.

Ed Phillips Group Chief Executive

“The outlook for the housing market in 2024 rests squarely on the path of interest rates. A cut may not come as early as hoped–but there is little doubt it will come”

16%

increase in the number of instructions

per branch

Q1 2024 v Q1 2023

Positive economic indicators, including the expectation of lower interest rates, are fuelling market momentum.

Window of opportunity

Mortgage approvals reach 17-month high

As market confidence builds, mortgage approvals reached 60,383 in February, the highest level since 2022 and 40% above last year.

Economy

The economic picture is improving, with inflation reaching 3.4% in February, its lowest level in over two and a half years and a positive sign for the housing market (ONS). Approvals for mortgages exceeded 60,000 in February, their highest level since 20221, and together with stabilising interest rates, buyer confidence has received a considerable boost.

Increased activity

Activity in the first quarter of the year has seen a significant surge, marked by a 51% rise in applicants per branch and a decrease in fall-throughs, from 34.5% in Q4 2023 to 31.0% this quarter. With prices still £12,609 below peak levels seen in the summer of 2022, buyers are sensing a window of opportunity to purchase at a lower price before the gap closes.

SALES

House prices are already edging up; the annual rate of house price growth increased to 1.6% in March, from 1.2% in February as momentum builds2. More sellers are entering the market and stock levels are improving, with the average number of properties on estate agents’ books reaching 42, the highest since February 20213. Increased choice is welcomed by buyers.

The market remains relatively price sensitive, with the number of properties seeing adjustment in asking prices remaining above normal pre-pandemic levels 4 However, vendors pricing realistically are achieving sales within a few weeks of going to market.

Stable investment

Property values are up 58% over the last decade, outperforming the 17% growth of the FTSE 100, solidifying bricks and mortar as a reliable long-term investment 5 .

Despite market fluctuations, property prices have remained resilient, on average £29,008 higher than three years ago 2 and with further growth forecast over the medium term.

Change since Feb 2023

Change since Feb 2023

Change from year earlier

Change since Jan 2023

Change from Q4 2022

Change from Feb 2023

Our data performance across our network

133%

Significant potential for investors

Forecasts anticipate a 19.2% increase in rents between 2024 and 2028, with new lets projected to experience a growth of 22.9%.

LETTINGS

Rents at all-time high

Since the pandemic, rents have grown an average of 29%1, underpinned by a lack of supply and strong demand.

Despite increasing regulation, landlords are finding themselves in an excellent position, with rents at an all-time high2 Income security is supported by renters staying longer, an average of 4.4 years in 2021-22, increasing from 3.8 years a decade previously 3. Additionally, the average void period is reducing, down to 18

days in February from 22 in January 4 .

While landlords without mortgages currently enjoy the most favourable conditions, buy-to-let mortgage rates are also on a downward trend. The average 2-year fixed-rate now stands at 4.81%, a significant decrease from 6.22% in July 20235 .

The latest indicators from the RICS survey continue to show a supply and demand imbalance which will sustain strong rental growth.

Strong returns

Indicative gross yields remain attractive in the rental market. The average gross indicative yield of apartments sold and rented in 2023 is 6.7%, significantly up from 5.3% in 20216 Additionally, strong rental growth of 53% over the last decade means that the average property bought in 2014 at £178,182 with an initial yield upon purchase of 6.0%, would now yield 9.2%, alongside experiencing a capital appreciation of 58%6.

Fastest-growing areas

Lomond operates in top buy-to-let regions, including the three fastestgrowing buy-to-let areas of Glasgow (11.95%), Nottingham (8.9%) and Leeds (8.02%)*. The majority of Lomond landlords take a fullymanaged approach, particularly popular with new landlords. Given the ever-evolving legal landscape and the growing professionalisation of the sector, it’s crucial to have support to navigate the sector and receive guided investment advice to maximize return on investment.

Our data performance across our network

Scotland

Operating the largest lettings agency in Scotland, our branch network covers the strategic locations of Edinburgh, Glasgow, St Andrews and Aberdeen.

“Our recent acquisition of Tay Letting has brought in over 2,000 properties across Glasgow, Edinburgh, and Dundee, taking our lettings portfolio to over 10,000 properties, the biggest in Scotland.”

6

Number of branches

Scotland

A strong long-term investment

Good asset class

Maintaining a balanced portfolio is important in investment, and acquiring well-located residential properties remains a promising long-term strategy, offering both steady income and capital appreciation. Over the last decade, rents in Scotland have surged 70%, while the average house price has increased by 42%1. The impact of strong rental growth means that the average property purchased ten years ago in Scotland with an initial yield of 5.6% would now have a yield of 7.8% based on the original purchase price 2

With strong rental growth in Scotland, there are great opportunities for investment, Glasgow saw almost a 12% increase in the number of buy-to-let investors over the last year, the highest out of all UK cities, while Edinburgh has had a 5.2% increase 3

Good quality Georgian properties in Stockbridge, New Town and

Average 10-year growth in Scotland

To address the imbalance between supply and demand, increased investment in private rental properties is essential.

Morningside in Edinburgh, and Glasgow’s West End are always popular, easy to rent and will do exceptionally well from a capital growth perspective. First floor and garden flats are particularly good to invest in, with outside space more popular since the pandemic and with almost a quarter of Scottish professionals now working fully remotely 4

The student market is performing well, particularly in Edinburgh, Dundee and Glasgow. Yields are strong but there is likely to be more wear and tear with these properties. With 99% of our landlords on our fully- managed

service, we can use our expertise to advise and eliminate any hassles of property management.

Supply shortage

Edinburgh (ranked 9th) Capital

75% of our landlords only have a small portfolio, meaning that our branches are experts in guiding clients through the details of everyday management and compliance. Scotland is facing a severe housing shortage, leading to increased strain on the rental market. To address the imbalance between supply and demand, increased investment in private rental properties is essential.

Glasgow growth

rise in number of buy-to-let properties over the past year

5.21%

Yorkshire

From The Pennines to the east coast, The Dales to The Peaks, our branches span the breadth and depth of Yorkshire.

“We oversee a portfolio of 14,500 fully-managed properties in our region, with the vast majority of landlords choosing our management service for peace of mind and optimal returns.”

Number of employees Yorkshire

Opportunities for investors

Rental demand remains strong

There are still huge opportunities for investors in our region. Yields are attractive, and demand is soaring for rental properties. New applicants per lettings instruction are 107% higher in Q1 2024 than the same period last year. Demand is particularly high for properties at the lower end of the price spectrum. However, with such a supply-demand imbalance properties at all price-points are being met with strong demand.

Average property prices in the region are still £7,762 below the August 2023 peak. This provides a window of opportunity to invest before prices start to rise again, with the market forecast to gain momentum in 20251

A 16.5% rise in rental values is projected for Yorkshire between 2024 and 20282 , making it appealing to property investors.

Average gross yields by property type

Student lets

The student market across our region continues to be buoyant. York is particularly popular, with student landlords now branching out to buy properties to rent to professsionals.

A good time to sell

The sales market has started the year on a strong note, with overall buyer demand up 76% in the first two months of the year, compared to the same period in 2023. Instructions per branch have increased 15% in the first three months of the year compared to the same period last year.

One of our properties in Hull is now generating a yield of 9%, up from 6.5% when purchased in 2021.

Yields remain strong

Leveraging our tailored advice, we assist landlords in pinpointing investments that align with their goals, be it maximising yields, which rise to an average 7.5% for two-bed flats 3, capital growth, or investing in familiar areas or investment types. Many of our properties have witnessed significant upticks in yields in recent years, as well as considerable uplifts in capital value.

One of our properties in Hull for instance is now generating a yield of 9%, up from 6.5% when purchased in 2021.

16.5% forecast rental growth in Yorkshire and the Humber

between 2024 and 2028

Manchester and the North West

Covering Manchester, Stockport and Chester, our local experts have an unrivalled depth of knowledge in key strategic locations.

“With strong rental growth, anticipated mortgage rate drops in the latter half of the year and capital growth poised to rise soon, current and prospective landlords have the prime opportunity to capitalise on investments.”

Acquisitions in last 2 years

Manchester and the North West

Unique market conditions provide opportunities to invest

Investors are returning to the market

We have seen a 50% rise in investor activity so far this year, compared with the same period last year. Although some smaller portfolio landlords are choosing to exit the sector, these are being replaced by increased activity from larger landlords or those looking to expand their portfolios.

There are good deals to be found with yields over 8% achievable. With rents and capital values likely to increase over the medium to long term, property is a great investment vehicle. However, it’s critical to be well-informed, knowing where to invest and what advice to take.

5-year rental growth

House prices in our region have shown resilience, Manchester in particular.

Hotspots

Monton, Chester, Stockport, and Manchester city centre are prime investment hubs, with strong rental demand, high capital growth potential and affordable price points if you look in the right places. Manchester’s dynamic economy and growing student population generate continued investor interest with rents rising 47% in the centre over the last 5 years1

Stockport, named the best place to live in the north west of England 20242 offers good value properties amidst rapid regeneration. Stockport was also the UK’s third busiest rental market in 2023, with an average of 48 renter enquiries for each available property3

Affordable price points and rental undersupply in Chester make it particularly attractive, while Monton’s transport links and thriving community promise solid returns and long-term growth potential.

Strong start

Activity in the sales market has been very strong across all buyer groups this year, with reduced fall-throughs and more sellers coming to the market.

Buyer registrations increased from 1,700 in January to 2,750 in February alone. House prices in our region have shown resilience, with 0.8% growth in Manchester, outperforming the UK average of -0.5% 4 Vendors who are being realistic on pricing are achieving sales within two weeks of going to market.

Manchester growth

Annual growth in Manchester house prices

Midlands

Our newly-expanded region extends our reach from the West Midlands heartland into Nottinghamshire, Leicestershire and Derbyshire.

Crathorne Regional CEO

“We have expanded our footprint in the Midlands through to Nottingham and the East Midlands. An extra 2,500 properties are now under our management as a result of these strategic acquisitions.”

LETTINGS

£52.8m

Value of properties sold in last 12 months

Midlands

Rapidly transforming cities in the Midlands

Reframing outlook

Mortgage rate rises have meant that some landlords have reconsidered their investment. However, professional property and mortgage advisors can advise on properties and mortgage products which can make investing in the housing market affordable and remain an attractive investment. Property can provide secure returns and capital appreciation, which can be more challenging to find in the financial markets.

Focus cities

Birmingham, Nottingham and Derby are all rapidly transforming cities. Each is witnessing rapid development, with new builds attracting investor attention in the city centres, where one-bed new build apartments are achieving around £900 to £1,000 pcm.

Lower-priced properties in particular are achieving excellent yields and are being sold and let very quickly, although demand remains strong all the way through to the upper end of the market due to the acute shortage of stock. Purchase prices are relatively more affordable in these locations and

West Midlands average gross yields over time

rents have risen 9.0% and 8.7% annually in the West and East Midlands respectively, the highest of any of the UK regions1. It’s unsurprising therefore that yields are extremely strong, now averaging 7.0% over the last 12 months in the areas we operate in, having grown from 6.0% a year earlier2.

Renters are staying for longer, particularly in the city centres. The average tenancy length in Birmingham was up by almost two months compared to three years ago1. Fewer checkouts reduce void periods for landlords, and if properties do go back on to the market they are getting snapped up.

Around 90% of our landlords are with our fully-managed service to eliminate the trip hazards of property management. An inhouse poll we conducted showed that many landlords who chose to handle things themselves were inadvertently being non-compliant.

Sales

We have seen an uptick in demand and an increase in properties coming to the market as inflation and mortgage rates head in the right direction and market confidence improves. Buyers are taking shorter-term fixed rate mortgages, expecting rates to be lower when it comes to remortgaging.

9.0% annual rental growth in the West Midlands, fastest of all UK regions

8.7% annual rental growth in the East Midlands, 2nd fastest of all UK regions

South Coast

Reaching from Chichester to Camber, our network of South Coast branches are market leaders for sales and lettings.

CEO

“Whatever your investment level, there is something for all types of investors in the South Coast region. Depending on your goals and entry level, we can offer professional advice on how to make buy-to-let work for you.”

South Coast 4408

Number of properties under management

Something for everyone

Good time to invest

A slight cooling of the sales market combined with an undersupply of rental properties and strong rental growth, which averaged 11% across our portfolio in 2023, present good opportunities for investment. Cash buyers are often able to secure discounts, saving an average of 5.3%, or £20,873 compared to buyers relying on mortgages1. Renter demand remains high with 15-20 + enquiries for each property, and 2- and 3-bedroom properties gaining the most interest.

Broadening your scope

Brighton remains a traditionally strong investment hub with huge rental demand and well-priced properties continuing to fly off the shelves. However, broadening your scope and exploring beyond Brighton unveils diverse opportunities across a range of price points to suit many different types of investors.

As mortgage rates steady, many are deciding to proceed with their moves before prices begin to rise again.

Varying entry points

Heading West

Many renting young families and professionals are moving out of Brighton into Worthing, Shoreham and Lancing to get more for their money.

Investors can benefit from lower entry points, strong rental demand, good returns and capital growth.

In Worthing, a 3-bedoom house can be acquired for a similar price to a 3-bedroom flat in Brighton and caters to a different demographic of renter.

Areas like Durrington with reputable schools also present valuable investment prospects. While Brighton sees ongoing development, Worthing is experiencing significant new development, presenting great investment opportunities.

Considering the options

Family renters are typically more likely to be looking for stable long-term

housing and stay longer in a property, reducing vacancy rates and turnover. For 42% of families, the ideal lease length is 24 months plus1. The generally quieter lifestyle of older renters minimises disruption and older renters are more likely to have an established rental history, reducing landlord risk. Conversely, the student market offers significant potential with high yields and robust demand, albeit with a potential need for additional property maintenance.

Sales

Activity levels have surged in the first few months of the year, with both existing and new buyers actively engaging in the market. Offers and sales have seen a notable uptick, driven by pent-up demand. As mortgage rates steady, many are deciding to proceed with their moves before prices begin to rise again, having been relatively static for the past 12 months.

Family friendly

27%

of renters in Worthing are families

27

members of the Lomond Investment Management Team, more than doubling in the past year.

Lucy Jones Chief Operating Officer

“Growing at pace, our recent acquisition of part of the UK-wide Rendall & Rittner Sales & Lettings portfolio illustrates our growing reach. We collaborate closely with local branches and leverage our nationwide presence to tailor services to each investor’s requirements.”

Lomond Investment Management

All-in-one solution

At Lomond Investment Management, we pride ourselves on delivering a comprehensive end-to-end process, with breadth of experience across the team. All aspects of the sector are covered, facilitating seamless operations for clients. We mobilise, let, manage and sell portfolios and developments throughout the UK, across all portfolio sizes and locations.

Serving as a single point of contact throughout the entire process with our dedicated account management team, we are an all-in one solution for lettings, management, block/estates management and sales. We anticipate the evolving and flexible needs of clients, especially as Build to Rent operators and investors are increasingly engaging earlier in the planning and design phases.

Fast growing

At Lomond Investment Management, our connected network spans the UK, providing dedicated services for Build to Rent and Single-Family Housing providers, alongside individual and institutional investors. We leverage the

15

Locations in England and Wales

Lomond Investment Management currently operates in fifteen key locations in England and Scotland.

Nationwide reach

Lomond Investment Management manages Build to Rent and Single-Family housing from Exeter to Edinburgh and Bristol to Cambridge. Investors may be individual or institutional and developments range from just a few units to large-scale sites.

TO LET

3,000 BTR units

to be under Lomond Investment Management by the end of 2024

Locations of Lomond-managed developments

c.17%

of emails enquiring about BTR were sent from over 50km away. (single-family and multi-family units)

Edinburgh

Newcastle

Enquiries

Build to Rent developments not only draw attention from the local area.

power of our national network, alongside regional hubs and high street agents with deep local expertise to give our clients expert guidance.

Our fast-growing team has increased to 27 dedicated members, up from 11 a year ago, as we strengthen and expand into new territories. We maximise returns and minimise risks for our clients with our bespoke, innovate approach for investors seeking expert guidance in marketing and managing all aspects of their property portfolios.

Liverpool

Chester

Birmingham

Warwickshire

Bristol

Exeter

Yorkshire

Manchester

Nottingham

Cambridge

London

Crawley

Hampshire

Rightmove recently calculated that around 17% of enquiries by email came from over 50 kilometres away. This may reflect the attraction of BTR as a safe and convenient option for people moving to a new area for work or study, or the pull of high quality developments.

There are more than five million households in the private rented sector, an increase of close to 20% on a decade ago (Census 2021, England & Wales). Build to Rent developments have a huge pool of potential renters, and the fact that they draw from a wide geography make them an attractive investment.

AWARENESS OF BUILD TO RENT

Increasing enquiries for Build to Rent

Awareness of Build to Rent (BTR) is rapidly rising, with Rightmove reporting an increasing number of renters enquiring about both BTR and private rental sector (PRS) properties. Through our national team, regional hubs in London, Manchester and Exeter, and local offices, we strive to increase the awareness of both Build to Rent and Single-Family Housing in the rental market.

Recognition of choice

As awareness of Build to Rent rises, tenants are recognising that there is choice in the market. There are, however, variations between cities. While Manchester, Liverpool and London have all seen increases in the proportion of multiple enquiries for both PRS and BTR over the last two years, Leeds clocked up 40%, substantially up from 17% in 2022.

A BESPOKE SERVICE Lomond Investment Management

Managed developments

Our bespoke, innovative solutions are designed to maximise return and mitigate risk for investors seeking a trusted partner to manage the specialist processes of marketing and managing all aspects of their property portfolios. We truly understand the complexities and unique requirements of all aspects of portfolio and asset management.

Marketing and lease up

• Development and Scheme pricing

• Strategic approach to maximise occupancy whilst maintaining headline rents

• Letting team available to work on and off site

• Design, consultancy and furnishing solutions

• Tenancy administration and move in services

Management

• Mobilisation

• Operational management strategy

• Combined building and apartment management

• Reactive and longer-term maintenance plans

• Block and Estates services

• Health and Safety and statutory compliance

• Budget preparation and management

• Refurbishment and consultancy services

Lomond property services

Land and New Homes

Offering a full range of consultancy and sales and marketing services to landowners, developers and individual investors. Including research and viability reports, land consultancy and sourcing, through to turn-key marketing for land disposal, acquisitions and developments. For residential house builders and developers, our extensive database, bespoke marketing programmes, and enviable track record going back over 25 years, have seen our Land and New Homes teams appointed sales agents on many prestigious development properties throughout the UK.

Conveyancing

Working with a trusted panel of solicitors and conveyancers in your area, we speed up the moving process by up to 4 weeks. Offering end-to-end digital onboarding, Compliance, Legal Preparation, Conveyancing and Surveys.

Our online portal houses all important documents and provides complete visibility to all parties, tracking the progress of conveyancing in real time. A fully regulated service, providing clear, independent and professional advice.

Investment Management

Providing an account-managed single point of contact service for lettings, management, block & estates management and sales throughout the UK, irrespective of portfolio size and geographical location. We work with both Build To Rent and Single-Family Housing clients as well as Institutional and Individual Investors. Our bespoke, innovative solutions maximise return and mitigate risk for investors seeking a trusted partner to manage the specialist processes of marketing and managing all aspects of their property portfolios.

Lomond Mortgages

From online, digital services to in-branch brokers, we access the whole of the mortgage market with our specialists’ brokers. With expertise in mortgages for first time buyer, homemovers, and remortgages, as well as buy to let mortgages for the one off investor or career portfolio landlord, we provide fully independent advice and access to all major lenders.

Ed Phillips Group Chief Executive Lucy Jones Chief Operating Officer Ian Sutherland Chief Financial Officer

We have an established network of high quality regional sales and lettings agents across Scotland, Yorkshire, Manchester, Birmingham, Brighton and Exeter. With integrity, technology and innovation at our core, our brands are market leaders, with a competitive advantage over the strongest independents and the largest corporate and franchise agencies in the industry. Our ambition is to continue acquiring and transforming local agents across the UK, expanding existing regions and venturing into new areas.