The UK housing market, like the economy, is in a state of flux as we all wait to see how Brexit will work. The latest indications are that Theresa May is determined to take no prisoners as she negotiates to release Great Britain from the iron clad constraints of the EU and the single market. How playing ‘hard ball’ will affect the housing market going forwards is open to discussion, but in the meantime, let’s examine what the experts are predicting for 2017 and beyond.
The property market took a huge hammering when the global recession struck in 2008-09. The bubble burst and millions of investors and home owners were left with negative equity and homes they couldn’t sell. Since then, the property market – and the economy – has recovered. Demand for property, in particular first time buyer property, is largely outstripping demand. In many areas, first time buyers have been priced out of the property market completely, which has had a knock-on effect in the private rental sector.
Taxes and Brexit
At the upper end of the market, prices have slowed down, with demand curtailed by the introduction of new Stamp Duty rates. From 2014 onwards, buyers purchasing properties worth more than £1.5 million had to pay significantly more in Stamp Duty tax. George Osborne also introduced an extra charge on second-home owners, which was intended to dampen enthusiasm from the buy-to-let sector.
Let’s not forget the shock of the EU referendum, either. The remainers were convinced the UK public would vote to stay in the EU, so when we voted to leave, it sent shockwaves through the economy, with sterling dropping like a stone overnight.
The London Property Market
The effect of a weak pound has had a dual effect on the UK housing market. On the one hand, overseas investors have been attracted by bargains, but overall sales have fallen, particularly in the high-end sector. In London, many upmarket developments in prime areas have been slashed to attract buyers. According to one report, sales of luxury properties in London fell by 86% in 2016, which is in sharp contrast with previous years. As a result, many developers are downgrading their projects in a bid to make them more attractive to a wider, less affluent, audience.
Overall, the housing market in the UK is rallying strongly, despite uncertainty regarding Britain’s exit from the EU. However, as we have already touched upon, there are some startling regional differences. In London, prices have flat lined, with very little movement in the upper end of the market, but regional growth away from London is strong, with increasing demand pushing prices up.
Buyers Move Away from the Capital
London is now unaffordable for many, so buyers are moving away from the capital in search of bargains. Places like Cambridge are enjoying a property boom. Despite dire predictions from the Bank of England in the wake of the EU referendum, one of the UK’s major mortgage lenders, the Halifax, reports price growth is strong and it now costs £222k to buy a typical home in the UK, a rise of 1.7% in the last two months.
There are also signs Theresa May plans to tackle the affordable housing crisis with a program of investment in the sector. There are currently plans afoot to build three towns and 14 villages. However, this is unlikely to be enough to replenish UK housing stock.