Brexit and UK property
The UK’s property market should have the sort of strength and health required to withstand the uncertainty that is sure to come in the year ahead, thanks to demand, supply and the general market reputation that has repeatedly carried the sector through turbulent waters over the past decade.
As of March, the British government is hopeful of triggering Article 50, which is the document it requires to begin the official proceedings to remove the UK from the European Union (EU). Thanks to the fact that there has been so much debate and uncertainty about what this will mean for the UK and its citizens, no one really knows what to expect from the negotiations. However, experts are predicting a slowing in the economy.
Although the likelihood of a recession is, at this point, looking unlikely, what is being predicted is that growth, which has been surprisingly reliable since the vote to leave the EU, will start to slow as the process for leaving the single market comes around. The British Chambers of Commerce (BCC) believes that in 2017, the economy will see growth of 1.1 per cent, down from the 2.1 per cent it is expected to return for this year, largely because of the widespread uncertainty over Brexit.
However, one market that is expected to remain resolute throughout this period of potential turbulence is that for property, with a number of promising predictions in place already for 2017. We take a look at just a few.
Building has been a big issue in the UK for some time, with the government promising more than a million new households, yet holding back the Build to Rent sector at a time when it had the potential to boost housing numbers nationwide.
In 2017, however, even though the economy won’t be performing fantastically, demand from buyers should keep building on the up. Nationwide has predicted that building companies are already gearing up for increasing their activity next year. And it won’t just be for 2017 either. It said that they have the potential for continuing this for the next five years, showing the confidence that the sector currently has.
Perhaps the most glaringly obvious indicator of how the housing market is performing at any one time, predictions at the moment also suggest that house prices will continue to grow, even as the economy starts to slow down, fuelled by Brexit fear.
Rightmove and Nationwide are both predicting that over the course of the next 12 months, the average house price will see a modest yet rather impressive two per cent jump as the market continues to defy the Brexit uncertainty and flex its muscles. This is expected to be fuelled by the continued growth in the regions, as demand for better value homes, both to live in and let out, rises.
The rental market is also expected to see continued growth throughout the year ahead, which will be good news for investors in a sector that is experiencing more challenges than any other, and yet still coming through strongly.
On top of the Brexit challenges, UK rental investors are also having to deal with Stamp Duty surcharges and the upcoming changes to the mortgage tax relief rules. But in spite of this, only positivity is forecast for the year ahead.
According to the Association of Residential Letting Agents (ARLA), over the coming year, 80 per cent of agents are expecting to see a rise in rental prices, which should see investors bringing in higher returns. It’s expected that this will be fuelled by a rise in demand, with more than 53 per cent saying rental homes will see more demand in 2017 than this year.
Overall, the Brexit process is expected to be something of a challenging time for the UK property market. But what is clear from predictions is that the sector is well placed, perhaps more than any other, to withstand the pressures ahead and come out strongly on the other side.