UK Housing Market
Forecasts for the UK property market are increasingly positive. It’s been a long shutdown period and people appear to be resuming their efforts to move or buy a new home.
The most recent stats in October show the north of England is doing well, and that an exodus of renters in London is raising rent prices and home prices in areas outside.
Hoped for drops in home prices isn’t happening and renters will find fewer lower-priced rentals to let. However, that won’t stop the ex-Londoners and other big city workers from seeking lower-cost accommodations. For long term investors, the rising price forecasts from JLL continue to support the value of buying homes and rental properties in the UK. See the stats below.
The Summer Housing Boom Continues
This summer’s boom in home sales are a far cry from the previous pessimistic outlooks for 2020. It seems wealthy buyers who are unaffected by layoffs and reduced income are fueling the frenzy. Many are moving outward from London and other city centers.
And of course there a host of factors driving the UK 2020 housing sales season including the stamp duty holiday, lower mortgage rates, and the work at home trend that has workers seeking more suitable work at home comfort.
New 2021 Forecast Dampened a Little
As we return to normal, previous economic and property market forecasts carry a little more credibility. It may not be business as usual, but Brits and UK companies are adjusting to the new work environment and a slower economic output.
Much of the negative forecasts might be focusing on economic forecasts and trouble with Corona Virus surges, but we have to believe we’ll get control and be able to open business fully, under new terms of course in 2021.
The fears over the end of globalism and reduced trade are easing. Once Covid 19 is beaten, the world will enter a period of euphoria and optimism which should fuel spending. That new spending could fuel more home construction in the UK. As you can see, housing construction is brisk again.
Screenshot courtesy of markiteconomics.com.
JLL Forecast for Next 5 Years
Despite all the political, health, and trade uncertainties surrounded the UK economy, JLL is offered up its housing UK market forecast.
JLL believed house prices would fall 8% within 2020 and that UK new housing starts would fall to 80,000 in 2020. They also previously expected home sales to fall 550,000 from last year’s totals to around 650,000 in 2020.
JLL sees annual transactions getting back to normal by 2023 at 1.2 million. Of course, the pandemic and other economic factors (Brexit, Stamp duty) haven’t eroded the UK housing market. It’s obvious the adjustment to the virus is shifting expenditures and creating new opportunities.
Screen capture courtesy of JLL.co.uk.
JLL expects rental prices to decline by 2%.
Screencapture courtesy of JLL.co.uk
Stamp Duty and the Falling Pound
Screen capture courtesy of uk.gov
The weaker British pound and falling prices in the UK were drawing the interest of overseas investors. For UK buyers trying to decide on the buy vs let option, the answer is to rent.
Some may be waiting for an expected cut to the stamp duty by Boris Johnson which had dampened the UK real estate market after it was introduced. Property purchases by Brits had dropped 16% year over year.
Some property company experts suggest that a £500,000 starting threshold for a Stamp Duty and Land Tax would be help the overheated market of London and the South East but could lead to a two-tiered housing market. There are fears no one would buy in lower-priced Scotland.
A good percentage of buyers are wanting and expecting a stamp duty cut from the Johnson government.
JLL offers its price outlook report, beginning cautiously but much stronger within 2 years:
Screen capture courtesy of residential.jll.co.uk
Property Price Forecast Courtesy of Savills.co.uk
House Prices to Rise 15%
JLL UK experts forecast house prices in the UK will grow 15% over the next 4 years. They support their outlook with a forecasted 68% rise in GDP, 6.9% rise in household disposable income and a 2.7% increase in employment.
Sales Forecast UK Home – screenshot courtesy of Knight Frank
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This chart below from JLL, shows investment is strong in Berlin and Denmark, and not far behind, London UK. Investment in European multifamily properties rose 40% to 56 billion euros in 2018.
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PWC UK Economic Report 2020
In the recent PWC UK economic report, the company forecasts business investment to stay low, although 2020 national GDP levels will remain similar to 2019.
In their UK housing report, PWC cites mounting affordability issues for workers in London. They believe house prices will rise only 1% across the nation.
“Locked out of purchasing a home, many young people – commonly referred to as “generation rent” – have turned to renting. The proportion of 16-24 year-olds renting privately has risen from 51% in 1998/99 to 73% in 2017/18 and from 20% to 46% for 25-34 year-olds. ” — From the Pwc housing report.
Housing shortages, high deposit requirements, stagnant wages, should make many UK residents renters by necessity for the immediate future.
UK Rental Tenants on the Move
After the removal of Tenant fees, renters are ready to move. Demand in the Uk rose 7% overall and in London saw a 13% increase in demand for rentals. Asking rents in London are at a new record high of £817 per month.
Rental Housing Price Forecast – courtesy of Knight Frank
UK National Average Asking Prices
According to research from Rightmove, within London, the zone 1 area suffered a 6.5% price drop year over year . The average price reduction across London was £8000. Average asking price is £628,458. Reports are that rightmove agents are losing their jobs.
Flat Rental Prices Levelling Out
Nationally flat and home rental prices rose 2.7% while rents in Greater London fell 1.6% in the second quarter. However year over year, London prices are up 3%.
Chart courtesy of Rightmove.co.uk
Rightmove top London – courtesy of Rightmove.co.uk Report
Is this the Time to Buy a UK Property for Let?
The above charts would have us believe there are hotspots for price growth such as Midlands and Scotland.
According to Propertyhub, the city of Manchester, which has 30% rental properties, is worth a good look. It has a high student population which helps to prop up demand for rental flats. Liverpool as well is cited for high student populations. And Birmingham may have a rental housing shortage that could open it to price growth.
We’ll bring you additional insight into the UK’s rental housing market in future.
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