The property industry is truly awakening from its festive slumber and after a very busy 2015, looking forward to what the coming year may bring. We’ve spoken to a wide range of experts to gather their thoughts on the next 12 months for the UK housing market.
The government made a major announcement yesterday about plans to build up to 13,000 new homes on five sites of publicly owned land as part of its Starter Home Initiative, and many eyes will be set upon the nation’s housebuilders to match their profits to an increase in the number of homes they are building to meet demand.
Meanwhile, the finance sector is realigning its thoughts on when the historic low Bank of England base rate, set at 0.5% in March 2009, will eventually rise, and its impact on mortgages and homebuying.
Financial services director at estate agents Waterfords, Sean Wickes, says: “It would appear that the flavour for an increase in interest rates is beginning to wane again as inflation remains low, suggesting the market does not look poised for a rise just yet.
“The timeline for an increase in rates now looks like it could be slipping to Q3 next year or beyond, unless there is an unforeseen occurrence economically. The market for lending therefore remains very strong, with new rates coming out daily at the moment and fixed rates continuing their downward trend to compete with the variable market.
“There has never been a cheaper time to borrow and the public are taking full advantage of the great low cost mortgage deals available, which we anticipate will continue through much of 2016.”
House price trends changed significantly in 2015, with London’s previous surges falling back as changes to stamp duty and overseas financial markets affected demand at its top end and filtered down. Other regions, particularly in the southern half of the UK, saw price rises strengthen somewhat, though many remain below their pre-economic crisis peaks.
Paul Smith, CEO at haart estate agents, sees further changes occurring this year: “The top end of the property market, particularly in London, will see a price correction in 2016 because of the impact of stamp duty, consisting of a 10% drop in value for homes over £1m. However, this will have no bearing on the core property market, which will experience further average price increases in 2016 of up to 10% across the UK.
“On paper it will look like a tale of two countries as London will see an increase of around 3-4% due to the top-end market correction.
Smith remains concerned about the supply of homes for sale: “There are around 29 buyers chasing every property listing and an abundance of mortgage providers but the problem remains a lack of appropriate stock. Unless the government takes drastic action to drive either private or public sector housebuilding, the situation is not likely to improve [in 2016].
“The issue could develop into a serious social one if young people continue to be driven out of our major cities. This demographic is most likely to provide energy, vibrancy and new ways of thinking so our major economic hubs like London are at real risk if property becomes unaffordable for all but the super-wealthy investors.”
Glen Wilson, head of property, SME banking, at Lloyds Bank Commercial Banking believes “overcoming the housing shortage will remain a focal point for housebuilders in the coming 12 months” and is encouraged by the bank’s findings from housing providers in 2015.
He says: “Growth is high on the agenda, with housebuilders surveyed for our inaugural Lloyds Bank Commercial Banking ‘Building for Growth’ report stating they plan to invest an average 30% of their current turnover into their business over the next five years – this should help deliver more affordable new homes across the country to help renters move into homeownership.
“Small and medium-sized housebuilders remain concerned about recruitment, and we expect there to be 58,000 new jobs created and an investment in apprentices over the next year to ensure there is a pipeline of talented workers coming into the industry.”
Lauren Abrahmsohn of Glentree Estates' new homes division hopes the market will settle after an unsettled election year. “2015 was a year full of promise and, once the election was over, the residential new homes market promised to ‘pick up its feet and start walking’.
“Unfortunately, this did not materialise, although there were pockets of movement including a few, surprising, sales at the upper end of the market. Developers needed to be realistic on prices, shaving their margins, in order to be able to move on to the next scheme and international enquires were few and far between.
“The hope is that people are now comfortable with the newly elected government and have come to terms with the new traxes associated with moving home resulting in buyers/sellers having the confidence to make a move.
“Although there is a lot of emphasis by the government to build 200,000 new homes in the UK during the course of the year, where they exist, they are still quite rare and will always command a premium price. We feel that next year prices will steady, if not grow, in this category. They offer consumers an enticing package of convenience and luxuries and are excellent investments.”
Stephanie McMahon, Strutt & Parker’s head of research, sees infrastructure investment as a key factor to the success of a region’s housing market: “The benefits...can clearly be seen with the uplifts in values witnessed across central London off the back of Crossrail, in places such as Farringdon and Shepherd’s Bush, amongst others.
“Looking outside of London, the electrification of the Great Western line (first stages due to open in 2017) between London, Oxford, Newbury, Bristol and Cardiff will improve both journey times and capacity, ultimately ensuring greater connectivity for these locations and their hinterlands. Oxford and Bicester will benefit from the train line from Marylebone being brought into Oxford at the end of October 2015, with Oxford Parkway providing a large, commuter-friendly station for London.
“The cities across the UK are investing heavily in public realm and connectivity. The opening of Birmingham New Street station is a great example of redevelopment and regeneration of a city gateway. The Northern Powerhouse is a much-used phrase, however, immediate change is unlikely due to the long-term nature of infrastructure improvements. That said, city region autonomy will for the first time allow genuine management of local transport services and infrastructure - which will certainly have a positive impact in the medium to longer term.”