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. On average, just over 30% of these buyers had been gazumped by rival bidders, while 79% feared gazumping tactics have become more common in recent years due to fierce levels 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 East and West Midlands, where major cities such as Birmingham, Leicester and Coventry reside, intense competition is rife.
In the West-Midlands, 32% of buyers said they had been gazumped, higher than the average rate across England and Wales, and the largest number behind London. Additionally, 28% of buyers in the East-Midlands revealed they had themselves gazumped a rival bidder, taking the 2nd place spot behind the capital. Unfortunately, this is all taking a toll on participants.
Some 44% of buyers in the West-Midlands lost money paid in fees because of a property purchase falling through. Across all the other regions in England and Wales, barring London, this rate never topped 28%.
When examining the economic clout of the midlands, it’s clear to see why competition in this localised market has ramped up.
What’s going on in the midlands?
House prices across in the midlands have risen substantially over the past 12 months or so– rising higher than what’s been seen in London. In the East-Midlands, houses prices have grown by an astounding 15.2% in the year to May 2022, with the West-Midlands seeing growth of 14%.
Often thought of as the UKs engine of house price growth, the Midlands proved particularly resilient during the pandemic. In the two years to February 2022, property values in Nottingham alone increased by a quarter and out of the 10 English cities that saw the biggest house price rises, half came from the Midlands.
Yet, even with these rises, house prices in the midlands are much lower than what they are in the southeast. This creates opportunity for buyers wanting to take advantage of rising prices at a relatively affordable scale.
The market for renters in the midlands has also grown and could continue to do so over the coming years. The UK’s private rental sector is set to rise by 6% by 2025 and while London currently has the largest market in the UK, the West-Midlands has seen the highest growth rate. Since 2005, the West-Midlands rental sector increased by 113%. Over the coming years, this localised market could grow further.
Is there still room for this local economy to grow?
There’s still plenty of room for the Midlands economy to grow too as investment pours into the region. Specifically, infrastructure in the Midlands should see an explosion of activity. The Government recently approved plans for a 165-mile long “drone superhighway” connecting the Midlands with the Southeast.
Tram expansion projects are also in the works and the midlands is expected to be one of the main beneficiaries of the upcoming high-speed railway line (HS2). In Birmingham alone, plans are in place to push development projects through to 2040. Demand for office space in the city is also on the up, and the Commonwealth Games are just around the corner.
The Midlands are presenting many opportunities for investors, whether they’re looking for affordable property with room to grow or industrial opportunities. But where buyers try to take advantage of this, gazumping could become even more prevalent.
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.