2017 UK property forecast
Another year is coming to an end, and our property market has seen many ups and downs. Throughout 2016 the headline rate of UK house prices growth has slowed down, due to the drop in property prices in London as affordability issues for first-time buyers and tax hikes on expensive and investment property subdue demand in the city. This along with Brexit uncertainty hasn’t helped the property market in the UK either.
“It would be an understatement to say this year has not gone as expected,” said Mark Hayward, managing director of the NAEA. “However, the property market is mostly still feeling the effects of events which happened last year… Next year, we expect it’ll be more of the same; there won’t be a ‘property Armageddon’, but things won’t get much better for first time buyers, and those looking to up or downsize.”
According to property market experts, housing supply is unlikely to improve this coming year. The UK is building fewer 150,000 new units a year and Wales. The government is targeting a million new homes by 2020, so that number has to drastically increase until then. However, the property firm JLL is predicting that new housing starts in England will actually drop in 2017. “Although levels of new housing delivery were still woefully low prior to the referendum at least the direction of travel was positive and encouraging,” said Neil Chegwidden of JLL’s residential research team. “This will now fall back again.”
Affordability issues for first-time buyers are expected to remain a problem for London in 2017. The estate agent Knight Frank forecasts a 1% fall in London house prices during 2017, compared to 7% growth the previous year. “Looking into next year we believe that the slowdown in prices which has been evident in central London over the past 12 months will spread to the wider region, with Greater London prices down marginally in 2017,” Knight Frank said.
“This slowdown in the capital will likely be experienced across the rest of the country with price growth down notably on 2016 levels.” It forecasts 1% house price growth in the UK during 2017, down from 5% in 2016.
Savills estate agent predicts zero growth in the UK house prices in 2017, but London’s slowdown is driving more buyers out to neighbouring regions, where they can find cheaper property, or get more for their money if they currently own a home in the city and want to cash in on recent gains. And that is sending prices in these areas higher.
“We expect the strongest price growth to be the south-east and East of England over the next five years, with price growth in London curtailed by affordability pressures,” said Lucian Cook, director of residential research at Savills.
“Towards the end of this period, markets in the Midlands and the North will show more capacity for house price growth, though much will depend on local economic drivers. Tax changes are expected to cause investors to shift their focus to some of these higher income yielding lower value markets.”
Good news is that demand will continue to receive support from the Bank of England’s ultra-low base rate.
But transactions may still fall as fewer buy-to-let investors enter the market amid tax rises for landlords. “Greater caution among homebuyers is expected to translate into lower transaction levels across the market,” said Savills’ Cook. “Overall we expect transactions to fall by 16% over the period to the end of 2018 before gradually recovering back towards the current level of 1.25 million.
“We expect mortgaged buy-to-let investors to be particularly affected given the 3% stamp duty surcharge they now face, the reduced tax relief they are able to get on mortgage interest and the prospect of greater mortgage regulation.”
Brexit is the biggest challenge for the coming year. The UK government is set to begin formally exiting the EU by March 2017, and will create a cloud of uncertainty over the economy.
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Written by: The Team | On: December 15, 2016