We’d all like to know what 2020 has in store, and one group of industry experts has set out their expectations for the London housing market. Should we expect big changes?
As we go into the new year, prospects for the UK property market already feel a little different. The Conservatives’ landslide victory has at least brought an element of certainty back to the country, and the housing sector in particular. While our position in the EU is by no means resolved, those who were adopting a ‘wait and see’ approach are gearing up to move forwards now.
The spring budget will be announced in March, which will set out the government’s plans and hopefully go into more detail on its proposals for the housing market, including stamp duty, the private rented sector and homeownership.
The uncertainty has arguably hit London the hardest, and investors have increasingly been attracted to the regions outside the capital, particularly the north and Midlands. Whether the new political landscape will do much to alter this remains to be seen, but below are a few industry insiders’ expert opinions on what 2020 holds, as told to PropertySolvers Investor Services.
Rents could rise faster in London
A dearth of available properties in the rental market, particularly in the capital, could see rents creep up over the course of 2020. This may be more pronounced in London, according to Tarrant Parsons, economist at RICS.
“As the sector continues to struggle with a lack of supply, the RICS survey data suggests rents will rise by 2.5%,” comments Parsons. “In London, rents are expected to rise at an even faster pace of 3%.”
Grainne Gilmore, partner and head of UK Residential Research at Knight Frank, backs up this opinion.
She says: “The current shortage of supply in the prime London lettings market may be further exacerbated as owners attempt to capitalise on any perceived ‘bounce’ and list their property on the sales market, which could put upwards pressure on rental values.”
London feels the effects of politics
While London’s property market is the least affordable for buyers, Miles Shipside, director and housing market analyst at Rightmove, believes the market there could be finally bottoming out.
“We expect a more modest price rise of one per cent in all of the southern regions where buyer affordability remains most stretched,” he comments.
While Brexit has certainly had an impact on many markets in the UK, it has been felt more keenly in London, while many regional areas have ridden the wave more successfully. According to Paul Higgs, land, planning and development expert and CEO at Millbank, the election result will be a huge positive for the industry – and especially the capital.
He says: “As with many property-related matters, this will likely be felt more significantly in London than it will be through the other regions of the UK. There is a slight ‘lag’ in the property industry, as a high proportion of the value of its investment and development is based in the capital. The rest then spreads to the other regions.
“This means that London initially bears the brunt of any market boom or crash. For this reason, any industry ‘bounce’ in the coming months will be more notable in London than in other parts of the UK.”
“Generally speaking, the regions have not been significantly affected by the uncertainty that took hold since we UK originally voted to leave the EU – and some have actually done quite well. It is highly likely that the market in these areas will simply continue to ‘tick over’, while the most dramatic impacts will – in all probability – be London-centric.”
Foreign investment in the capital will grow
Foreign investment makes up a significant amount of London’s property market, and this could see a further boost as a result of the new political certainty after the election.
Julie Hanson, director at Just Do Property, believes that the London property market had already started on its path to recovery.
“Historically, where London leads, the south-east of England follows and this is likely to be a strong trend in 2020. We could also see a significant increase in overseas investment in London in the short term, prior to any further recovery in the value of sterling, as the path towards Brexit becomes a little clearer.
“Whatever your opinion on Brexit, it has impacted the London property market more than most because of its international appeal. The uncertainty was extremely damaging but a degree of certainty, and much more visibility than we have enjoyed of late, are likely to prompt a continued short-term bounce in property prices.”
However, while we may see some improvement in the capital’s housing market, it is still the area most open to fluctuations affected by the political and economic situation.
Sam Hadfield, UK managing director BuyAssociation, comments: “I see London prices recovering but perhaps only marginally, with the best gains still being made in cities like Manchester, Birmingham, Liverpool and Leeds.”
