The fascination with property in the UK ensures that concerns about mortgage rates and house price fluctuations will always get more attention than concerns over the larger economy. So what happens now?
Article 50
Article 50 was triggered on Wednesday 29th March 2017, and the housing market remained blissfully unaffected. The official notification to leave the European Union did not come as a shock, and so the market avoided any surprise fluctuations.
The more important considerations for the housing market depend on how the negotiations between the UK and the EU take shape. Constructive negotiations will likely reassure homeowners and investors alike, having little effect on sentiment or the number of homes which are sold. If the negotiations turn into a more turbulent affair then we can expect to see some caution in the market. This latter point is particularly applicable to London given that the market there is both incredibly expensive and already stagnating in most areas.
The market is so far unaffected
Following the Brexit vote of June 2016, there were clear worries that the economic turmoil which followed would find its way into the housing market. This was understandable, but turned out to be far from the reality despite an initial knock to confidence among homebuyers.
Once again, London was the biggest loser. The capital city has such a high average house price that any uncertainty is sure to affect it. Numbers of people moving in the capital fell as well as asking prices, the rate of growth and rental yields. The last 12 months have not been kind to the London market.
Overall however, the market has proven to be healthy. Jitters in London tend to skew the figures due to the city’s outsized influence, but the fact is that the housing market in the rest of the country is growing. The Northern Powerhouse regions in particular have been showing the rest of the UK the way forward. For instance, Manchester has reached the point where the predicted rates of house price growth and economic growth are higher than those in London. With a population expected to reach 625,000 by 2025, the booming Manchester market is showing no signs of slowing down. Furthermore, the rental market will only expand thanks to the severe lack of supply.
Potential homebuyers and buy-to-let landlords looking to expand their portfolios have been turning away from London for a while now, and this trend will continue in 2017. The average increase in house prices across the UK compared to this time last year stands at more than 5.5% according to Hometrack. In addition, interest rates continue to fall which has made mortgages more affordable. Banks are offering very competitive rates which have seen an increase in first-time buyers over the opening three months of 2017.
What does the future hold?
It has become clear over the past year that Brexit will be inescapable and any economic analysis (including analysis of the housing sector) will duly have to consider the effect of the process of withdrawing from the European Union.
The fact is, the property market will continue to remain a safe haven against whatever potential storm could come as a result of Brexit. Brexit may do many things, but one thing it absolutely will not do is solve the UK’s housing crisis; so it’s safe to say that property investors should have very few qualms about investing in the UK. The salient fact remains that as long as there is an acute demand for housing and a shortage of available homes, the UK will always be seen as a good investment choice. And this crisis, which the Government has admitted has taken 40 years to accumulate, cannot be fixed overnight.
The imbalance between the available supply of rental accommodation in the UK and the overwhelming demand is a sharp one. There are currently more than 5.7 million rental households in the UK, a number expected to top 7.2 million by 2025. As housing becomes less affordable, more and more people are turning to the Private Rented Sector for the long term. With an annual shortfall of more than 60,000 new homes this situation is not even close to being eased.
Buy-to-let investors looking to expand their portfolios in the major Northern Powerhouse cities such as Manchester, Liverpool, Leeds and Sheffield are in the right place at the right time to maximise both capital gains and rental yields. The Northern Powerhouse is the UK’s buy-to-let hotspot and the regional property market is set for a fantastic 2017.
