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Property News

What will 2017 bring?

It's customary as we approach the festive season for housing experts to offer their thoughts on what the next twelve months will bring. And, despite the uncertainty surrounding the wider economy and its potential impact on the property market, there has been no shortage of housing economists and other observers setting out what they expect to happen in 2017. If there is a commonality to be found in these forecasts, it's the prefatory admission that 2016 didn't really go according to plan. The outcome of the EU referendum and the resulting political uncertainty meant that house price growth was slightly more subdued than most commentators predicted this time last year. This highlights the inherent difficulty in trying to anticipate the notoriously unpredictable British housing market and serves as a timely reminder that, as respected as the country's property specialists may be, nothing is set in stone when it comes to what will happen in the coming year.

London

There was something of a consensus among analysts this time last year that the London property market might begin to cool in 2016. The reasons for this view varied but the key factors were the new taxes around buy-to-let, an oversupply of high-end properties in the Capital and the sense that a cyclical market correction was long overdue.

Reading through the published studies on the London housing sector next year, the basic belief seems to be that the prime or luxury end of the market will continue to decline. There is, however, little agreement on the degree to which these house prices will slow. The factors at play at this end of the market during this year will continue well into 2017. A sluggish global economy will make matters worse since it is likely to prevent international investors - traditionally the key players in the Capital's most expensive residential property market - from buying houses or flats in such areas as Chelsea, Knightsbridge and Kensington.

Homes in other parts of London are largely thought to be reaching an affordability threshold and prices are therefore expected to fall slightly but not to the same degree as properties in the city's more exclusive postcodes. This is by no means a foregone conclusion, though as London has defied all expectations before and will no doubt do so again in the future. We cannot ignore the fact that house prices in London are dramatically higher than the median wage (9.7 times more expensive in the cheapest borough, namely Barking and Dagenham). Any downward adjustments in the cost of homes are unlikely to make much of an inroad into this imbalance.

When will prices start to rise again? Well, the experts are reluctant to suggest a time frame but Savills, for instance, say that they think things will start to pick up in 2019.

Rest of UK

One of the most widely-reported forecasts has been the Rightmove claim that house prices across the UK will rise next year but by a rather underwhelming two per cent. This headline figure, of course, does not tell the whole story. The reality is, as ever, much more nuanced. How?

Take the major cities in the South of England such as Bristol, Oxford and Cambridge. Prices in these popular locations are being tipped for a decline of around five per cent in 2017. By contrast, many of the great Northern cities - in particular Birmingham, Leeds, Liverpool, Manchester and Nottingham - are expected to experience house price growth of some four per cent.

The rationale for these predictions seems essentially to be that the cities in the South of England are rapidly approaching an affordability threshold, are more vulnerable to the economic ripples from Brexit and are more deeply impacted by the new taxes on investments in residential property. These factors are, at least to some extent, absent from the more northerly markets, meaning that the latter present increasingly attractive options for both investors and private house hunters.

Returning to the estimate that the average price across the entire UK will rise by two per cent, the obvious question is why the analysts believe growth will be so subdued in comparison to the past few years. In previous issues, we have discussed the conviction of such institutions as Halifax that general economic conditions will "progressively deteriorate" next year and that such factors as a weakening jobs market will weigh down house prices. In other words, prices could conceivably rise quite sharply in the first few weeks of the New Year but this trend won't be sustained and price growth will start to drop off as the year progresses.

There are some legitimate objections to this forecast, not least that the warnings about the economic consequences of Brexit have not been realised so far and presumably may never unfold. True. But, say the economists, the UK will not trigger Article 50 until early next year and that is when the country will really begin to see the effects of our exit from the EU.

Another important point is that the country's chronic shortage of housing is not going to be eradicated any time soon, despite the veritable slew of Government measures designed to increase our stock of homes. Surely this supply issue will sustain house price growth? Well, runs the argument, it will probably be responsible for such growth as we see next year but it won't buoy price growth at the levels recorded in the past few years.

Housing policy

One of the central pledges of the new Prime Minister Theresa May is that her Government will increase the supply of affordable housing. We have already seen some major policy announcements around housing. For example, funds will be made available to support infrastructure projects near new housing developments. In 2017, we are certain to see further strategies designed to ease the country's housing crisis.

It is certain that landlords and other property investors will continue to oppose the more draconian governmental measures around buy-to-let. In this context, it seems inevitable that the calls will get louder for Britons to abandon its obsession with home ownership and embrace rented housing.

The team at Nethouseprices will, of course, be monitoring the property market over the next year and will keep you informed of the issues that will affect you. Visit us again soon.
 

Source: Nethouseprices

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