The property market will grow in the coming year as confidence increases after Brexit uncertainty recedes, according to apropos by D.J. Alexander. They believe that, while there remains considerable uncertainty about the UK’s future trade relationship with the EU, the decisive vote to leave has boosted confidence in the property market, which will see growth among individuals and investors buying properties both for homes to live in and among the private rented sector (PRS).
Since the Brexit vote, our recent analysis of house prices showed that house price growth had halved in the 40 months following the vote, compared to the 40 months prior to the vote. Individuals and investors have been reluctant to commit in all markets until the direction of travel was clarified. The decisiveness of the Brexit vote in the Commons in December has lifted some of that uncertainty, which had previously clouded the marketplace.
David Alexander, joint managing director of apropos, explained: “Clarity and certainty are essential components of the property market and everyone, from someone moving to a larger home, to major investors, has been rattled by the Brexit drama and its apparent open-endedness. Of course, while there remain enormous challenges ahead, there is a feeling that the process has been unblocked and that planning for the next five to ten years can go ahead.”
“The underlying conditions for increased house price growth are in place with the UK population predicted to grow by over 300,000 per annum for the next 20 years, which means demand will remain high. Supply for the private sector and social housing remains well below this, so demand will continue to be strong, resulting in higher prices despite the regional variations within this. You would expect to see hotspots such as Manchester, Edinburgh, and Bristol continue, with only London - of the main cities - remaining slightly cooler as prices continue to re-adjust in the capital.”
David continued: “it is vital, however, that there are not too many giveaways in the budget aimed at kickstarting the housing market in London. A £500,000 starting threshold for any Stamp Duty and Land Tax (SDLT), for example, would be helpful in the over heated market of the London and the South East, but would create a two tier market; this would effectively collapse the Scottish property market, which already has the highest stamp duty rate in the UK, and would become too expensive to buy compared to the rest of the UK.”
“The PRS appears to be stabilising after a period of many landlords exiting the market due to changes in regulatory and financial systems, which made renting out a property more complex, more costly, and ultimately less profitable. Those who remain must adapt to the new world by adjusting their financial arrangements, ensuring they are operating as efficiently as possible, and examining all aspects of the business to maximise their income and their long-term profitability.”
David concluded: “There are many reasons to be optimistic about the coming year, and the coming decade. Rising house prices, a scaling up of social housing and growth in the PRS through BTR means that more people will find homes that they want to live in, in areas that they desire, at a price they can afford. I do believe that the coming year will continue to see the transformation of the estate and letting agency market as the business continues to move online with local support through the development of hybrid partnerships. Therefore, there will continue to be more High Street casualties as the bricks and mortar approach diminishes due to high costs and changing social patterns. Nevertheless, the legislative changes that are coming into the English market (already introduced in Scotland) will protect tenants through the removal of no-fault evictions, greater security of tenure, and open ended leases and will create a fairer, more transparent private rented sector better adapted to the needs and requirements of people in 2020 and beyond.”