The housing market in 2016 Part 3 – industry experts share their predictions

Posted 7 January 2016 by Keith Osborne

WhatHouse? takes a further look at the outlook for the UK property market from a range of leading figures...

After a very active 2015, we continue our look at what some of the property industry’s experts believe is in store for the housing market in 2016, with topics such as new homes supply, interest rates and stamp duty changes affect first-time buyers, families, downsizers and investors.

Having enjoyed its best profits for ten years in 2015, Essex-based housebuilder Weston Homes also broke its own records for reservations and completions last year (845 and 617 respectively), based in outer London and the Home Counties. Founder and chairman Bob Weston says: “I see the market under a million pounds being stable. We've had our post-recession bubble so I think house prices will move marginally above inflation.

Bob Weston“The top end – two million pounds plus – will be different. It's not just higher stamp duty; low oil prices and a strong pound will continue to have an effect. The new stamp duty rates for second homes, coming through in April, will only add to this. In terms of its impact on buy-to-let, it's bound to make some think twice, especially those buying with mortgages who are already put off by the changes coming through in 2017 that will prevent investors from deducting interest payments from taxable income.

“28% of our products sold last year were Help to Buy so the move to increase equity loans in London to 40% of value will massive for sales below £600,000.

“I would like to see a flat rate for affordable housing. Developers with the best viability assessors end up getting the sites because they can pay more for it. It's inflating land values. The government must give certainty so everyone knows what they have to work with. I would also like an incentive for local authorities to sell land to developers with the best scheme rather than always to the highest bidder. If we can buy land at a better price it will enable the homes we build to be more affordable.”

James Wyatt, partner of prime Surrey estate agency, Barton Wyatt, is pessimistic about the top end of the market. “Despite worldwide woes, the UK property market has been hit over the last year by a staggering array of extra stamp duty taxes by our government,” he says. “Receipts are forecast to be down by nearly £1bn [in 2015] – mainly as a result of 10-12% lower transactional levels. The top end of the market (over £5m) is in the slaughterhouse with 12% stamp duty killing off the golden goose. So there are several issues to watch in 2016.

Wyatt is damning of the government’s stamp duty surcharge on buy-to-let property: “Another government stab in the back for those investing for their retirement. Watch very strong sales up to £300,000 in Q1 then listen to the tumbleweed.” On interest rates: “We are likely to see our base rate shift up in Q3 or Q4. Despite its inevitability, the increase will spook just about everyone with mortgages.” On the possibility of Britain leaving the EU, Wyatt says: “I sit on the wall about this but an exit would end the UK's position as a grand world influencer. The pound and property would suffer.”

It’s not all gloom from his Virginia Water office, however: “The good news is that 10% deposit mortgages are back and so 2016 will see a strong first-time buyer market in most areas. Major towns and cities outside London may see prices increase by 10%.”

From the conveyancing sector, Maud Rousseau, group marketing and communications director of SearchFlow, says: “Last year, we witnessed a buoyant housing market with consumer confidence remaining high 2016 is set to be another positive year for the industry. This is reflected in our conveyancing sentiment tracker which reveals that 27% of conveyancers believe transaction levels will increase by up to 20% this year. The government has outlined its commitment to encourage first-time buyers to the market. The entry of this important group will be vital to ensure the fluidity of the market.

“There has been much speculation about the buy-to-let market and the impact the additional 3% stamp duty charge for additional homes, which comes into force in April 2016, will have on the market. The conveyancing industry is very likely to see a rush to complete property purchases prior to April, followed by a sharp drop in transaction levels. However, this is likely to settle later in the year. If rents remain high and housing stock is still in short supply, buy-to-let will remain a profitable investment for many.

Kate Faulkner​Property expert Kate Faulkner highlights the unpredictability of the UK housing market these days: “[It] used to be relatively easy to predict from a business perspective. Things were often quiet for the first few weeks of January then the rush began to the end of May, quiet-ish summers, a flurry of activity post summer holidays and a quietening down to Christmas. Not any more! Since the credit crunch, from one month to the next, we are never quite sure what is going to happen.

“The main game changer moving forward is that both Chancellor George Osborne and Governor of the Bank of England Mark Carney are keen to stop the huge hikes we've seen in property prices in the past and their efforts appear to be gaining momentum. The property price analysis we have done from the Land Registry shows that annual property price growth since the credit crunch is lower than the levels previously seen.

“Government policy raising taxes on existing and new landlords is sending a clear signal that they don't want people buying one or two properties to rent out privately. Instead, they want to support large landlords or those investing via a company. The problem with this is the one we've had for the last 30 years –  who will supply the increased stock required in 2016 to buyers and renters? Unfortunately, although plans are afoot to boost housing supply, it's not going to happen any particular time soon.

“My main fear for 2016 is that it may end up in a real 'freezing' of the property market from a stock perspective, with little to sell and little to rent, leading to fewer people being able or wanting to risk moving if there isn't much choice. In some areas (especially north of the Midlands), if buy-to-let sales are choked off by increased taxes, we may even see properties simply not selling and potentially lying empty, while social renters in the private sector end up with no-where to live.”

Dave Bexon of national housebuilder Redrow Homes believes his company will deliver their fair share of homes to meet demand. “We’re confident of making significant progress and launching further new developments,” he says. “Our offering to customers will widen in line with plans to open more developments featuring our Regent and Abode product, alongside our traditional Heritage Collection.

“We’ve reorganised our London operation to meet planned growth. A new division will oversee our Colindale Gardens venture where 2,900 new homes, commercial space and community facilities are planned. Elsewhere, Ebbsfleet Green in Kent, part of the UK’s first new Garden City for 100 years, will deliver up to 950 homes.

“We look forward to receiving more details on Government plans to assist housebuilders to improve supply and we’ll continue to tackle the skills shortage so we’re geared up to build the number of homes needed.”

Clare Crawford, commercial director at Aster Homes, which provides open-market and affordable homes, says: “The successful delivery of a number of collaborative and innovative developments in 2015 means we are well placed to adapt to further change. In fact we kicked off 2015 by launching a 350-home development in Paignton, Devon through a joint venture partnership with Galliford Try.

“Through the partnership, which has led to the creation of a new business - White Rock LLP, we will deliver new developments, and are already set to create more than 900 new homes together over the next seven years.”

Glen Wilson, head of property, SME banking, at Lloyds Bank Commercial Banking, says his company is helping to fund the increase in new homes construction:  “To further support the drive to tackle the housing shortage, we have launched a £100m Housing Growth Fund for small and medium-sized housebuilders to back nationwide housing construction projects, with our £50m of equity backed by the government with an additional £50m investment. 

Greg Ketteridge of Carey’s New Homes adds: “I believe that the market demand for homes will generally continue to be strong; with perhaps a slowing down on the buy-to-let market from the small investor as a result of what the government has recently indicated, 3% stamp duty increase and decrease in the relief on the mortgage interest. I would be surprised to see any interest rate increase, but if there are any it is likely to be very small.

“Outer London and the South East will continue to be strong, with a stronger pick up in the Midlands then 2015 has shown.

“[New] housing in the South East will continue to be in short supply but In spite of that I feel that price increases will start to level off. The planning issues will continue to be a brake on supply, unless there is the political will is provide LA additional funding so they can staff up to cope with demand.

“Unfortunately I cannot see in 2016 any end to the labour and management shortage and this will continue to effect the industry’s ability to deliver any substantial increase in volumes.”

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