Stamp duty land tax will continue to slow the top end of the UK property market and markets particularly driven by overseas investment, such as corporate lettings and London sales, will feel the combined impact of global economic uncertainty, including Trump’s presidency, Brexit and Eurozone political turmoil.
Nick Leeming, Jackson-Stops & Staff Chairman, commented: “There will be no change next year to the equation that has governed the property market in 2016: demand will continue to outstrip supply, which will drive up average property prices. House price inflation won’t be as high in 2017 as it has been in recent years, with some buyers and lenders impacted by Brexit, global political and economic uncertainty and recent property taxes in the short term. This means that the 2017 property market might turn out to be one that so many have craved in recent years, with more moderate price growth helping affordability.
This year there has been a patchwork of commitments from government to increase housing supply over the next Parliamentary period, but even if the government does kick start its plans into gear it will take some time for the results to come through and we won’t see the true impact in 2017. David Cameron built the least homes of any Prime Minister since 1923 and it won’t be an overnight fix that turns this trend on its head. In the short term the main factors influencing the UK property markets are macro-political and economic concerns and the prohibitive costs of moving, compounded by stamp duty land tax.
The Autumn Statement was disappointing in that it didn’t offer any remedy to punitive stamp duty rules. The impact of this policy is more keenly felt at the top end of the property market, as evidenced this year with many properties valued at £1 million and above struggling to sell, but a more liberal policy has the potential to help all buyers up and down the ladder.”
Country markets
The country homes market will see sustained price growth at the lower end (£400,000 – £1 million) and next year will be characterised by an ongoing lack of quality properties coming onto the market meaning that demand will continue to dwarf supply. The top end of the market will be slowed by prohibitive stamp duty rules as well as the general macro-economic and political uncertainty which is influencing the higher value market in all regions.
Country branches are reporting that homes located in villages or on the peripheries of villages are frequently proving more popular due to easy access to key amenities such as schools, shops and health care facilities, a trend that will continue next year. In 2017 the most popular types of property are anticipated to be modern houses with a contemporary outlook, with cost, comfort and low maintenance overriding the traditional beauty of Grade I and II listed homes. Where relevant, coast and water features have been in high demand throughout 2016 – this trend is set to continue next year.
Nick Leeming continued: “Next year professionals and families moving out of London and the Home Counties will continue to have a considerable influence in Essex, Suffolk and Norfolk, which will remain ‘go to’ areas of the country. This enduring popularity and lack of supply in the region means we anticipate average price growth of around 5% across next year.
We found that potential buyers in the South East were impacted by Brexit, with many working in the City influenced by macro-political and economic factors and how these will impact job security – as the situation stabilises next year we hope to see buyers become more confident about market conditions.
Areas such as Sevenoaks and Tunbridge Wells will continue to attract young families from London. These buyers will choose to be based in the towns, rather than rural areas, in order to have the best access to amenities including schools, shops and transport links.
In Exeter we have found that homes located in Dartmoor have been particularly popular and will continue to be so in 2017, which just goes to show the enduring appeal of being located in a national park – and particularly one that is within easy reach of a city.”
London
House price growth will continue in Greater London next year with around 5% growth across 2017. Higher value properties will continue to feel the strain of stamp duty and the impact of global political and economic uncertainty more acutely than the rest of the UK market.
Rental prices will increase by around 3% next year; there will be uncertainty amongst financial services tenants driven by concern over job security, but a rise in tenants from high growth sectors such as tech, media and telecommunications. Tenants will see more choice of homes next year than in previous years and prospective tenants will be much more savvy when it comes to pricing than previously.
Nick Leeming continued: “Greater London will experience house price growth in 2017, but well below the significant levels seen in the last eight years. Across 2016 we anticipate growth to have been around 10% in terms of prices, but next year we will see this halved to 5%. Stamp duty land tax increases will continue to slow the top end of the London market and overseas investors will be deterred by increased taxation and regulation. The Trump / Brexit outlook remains uncertain which, more so than elsewhere in the UK, is slowing and delaying buyer and purchaser decisions. This year there has been a marked difference between prime central markets, which have seen considerably less price growth than average, compared to prime outer London areas such as Weybridge and Richmond. This trend is set to continue next year.
Prime central London rental prices, such as in Mayfair, Holland Park and Chelsea, have not appreciated with a significant number of homes on the market, however areas such as Kings Cross, Pimlico and Richmond have increased in price due to higher demand in those areas. We expect rental market prices to rise marginally by 3% next year due to continued economic uncertainty among financial sector tenants which account for approximately one third of the prime rental market, although we will see a rise in tenants from other sections such as tech, media and telecommunications. The longer term five year outlook for rents in London is stronger than the sales market, as some people who would otherwise have bought will continue to rent due to uncertain market conditions. Some savvy investors will see 2017 as a good time to invest, with the pound’s depreciation in value making London property ripe for the picking.
On the whole tenants next year will be highly conscious of their budgets and pricing. Prospective tenants will be offered more choice, particularly with the high development pipeline in London and the potential for some of the new build stock to be re-directed to large scale institutional investors as managed rental stock.”
New homes
The London new homes market was affected by a degree of uncertainty in 2016, however experience shows that domestic and international buyers quickly regain their confidence in the market. Higher levels of demand should therefore start to return next year.
According to Mollior, which carefully tracks the new homes industry in London, there were approximately 30% fewer construction starts in 2016 compared to 2015, meaning fewer new completions in 2017 and beyond.
The situation will be slightly different in the South East commuter belt, where 2016 generally saw greater market buoyancy. This supports our business and we are on track to sell 28% more new homes in the Home Counties in 2016 compared to 2015.
Nick Leeming commented: “The new homes market in London will see little price fluctuation next year. It is unlikely to be a year punctuated by notable losses or super profits. It is the market that so many have craved over the years; one where those on the side-lines are not further priced out of the market, nor one where those who are stretching themselves suddenly find themselves in trouble. However as demand increases in 2017 and completions fall, this trend is not set to last much beyond 2017.
The new homes market in the South East commuter belt is driven more by the fundamental needs of life – a family home, near to good schools, downsizing and convenience for the commute to work – all underpinned by high unemployment and low interest rates. It is this trend that has led many traditional ‘London’ developers, to switch their focus for land acquisition away from the Capital and into the commuter belt.”
