The UK housing market has been enveloped in the cloud of uncertainty ever since the Brexit poll results. While the clouds are still lingering, the UK real estate market is slowly recovering from the impact of the two extremely significant influences of the previous year – the EU referendum result and the changes in stamp duty.
Due to the stamp duty percentage changes two years ago, the cost of buying a home in the UK has in many cases increased substantially. The additional duty rate on second homes introduced in April last year has also made it more difficult to purchase. The initial months of 2017 saw consistent price drop in the real estate industry, but the last month showed hope with considerable rise in demand.
Here are six real estate trends to watch out for in one of the world’s most in-demand property markets. Read on.
Increase in the Rental Market
The real estate market in the UK has tipped in favour of tenants as rents in London are falling. In November 2016, the rent rate fell to its biggest in six years by an average of 0.7%. However, 2017 will gradually see a rise in the rental market and by the end of the year, it is expected to reach a growth of 3% in London and 2.5% across other parts of the country.
Supported by higher earnings and the ability of family members to share the rent burden and with buying home becoming costlier, the UK rental market is eyeing an overall growth of 2-3% by the end of 2017.
Changing Household Structure
Research on the household structure of the UK reveals that in the future the most popular household structure will be that of couples without children, amounting to a good 49%. This will be followed by couples with children at 21%, and multigenerational houses will amount to 15% where children, grandchildren and grandparents live under one roof. Single parents will make up 3.4% while single people will constitute 7.9% of the households.
These new ways of living are expected to have a considerable impact on the housing needs in terms of the space and the design of the house.
Fewer People Will Move into New Homes
Increased property purchase tax has further enhanced moving cost, especially in the luxury real estate market. This is expected to persuade more people to not move and stay put. There was an indication in 2016 itself with Land Registry figures showing 4,000 fewer homes sold every month as compared to 2015.
Mark Hayward, Managing Director, NAEA predicts that the UK is unlikely to ever witness sales volumes like the ones witnessed before the recession. He also suggests that with fewer properties now available at affordable rates, most people won’t find what they’re looking for and hence, delay moving.
Experts predict that the entire country won’t be seeing a standard price rise. Unlike the last year, when growth was driven by the south-east and east of England, some northern sections will witness higher growth, or in many cases, lower falls this year onwards.
While the North West and West Midlands areas are expected to outperform others, East Anglia is also set to witness higher growth. It is noticeable that housing outside of London such as houses for sale in fleet in Hampshire & other very similar areas are also set to witness higher growth in the future.
Simon Rubinsohn, Chief Economist of RICS opines that the population will eye areas that are outside of the prime, but still commutable. Locations just outside of the main cities such as the area away from Cambridge are affordable while being commutable from the prime areas of London. The outside areas are expected to see a rise in prices, thus creating a divide between North and South of England.
Fewer Builders Building Homes
There’s a huge gap in the demand and supply of real estate in the UK. The number of homes built every year is still below the minimum numbers required to match the demand. Due to recession, many small and medium-sized builders failed to re-enter the market and hence, a large volume of buildings aren’t being constructed.
The House of Lords has called for additional 300,000 new homes to be built per year, but it will take time for the real estate market to pick up pace. The reduced payment capacity, increased stamp duty and taxes, along with other factors, are deterring the middle-class from buying houses. Fearing this, builders are concentrating more on the wealthy section of the society, which is a limited sector.
Sharp Decline in Buy-to-Let Investments
In the third quarter of 2015, 14.5 percent of all mortgage lending that happened in the UK came from buy-to-let investors. But the scenario has drastically changed with some of the crucial advantages being altered by the government. The introduction of stamp duty for anyone who buys more than one property is one of the biggest hindrances in the buy-to-let sector. Other factors such as decreased affordability and downgraded valuation of properties due to recession will eventually force investors to opt out of buy-to-let investments.
Over time and with more clarity with respect to Brexit terms, economists are hoping for an eventual increase in the UK real estate market. But the current scenario points to the above-mentioned drifts taking place in the near future.
Author Bio : Tracey Koster is a passionate writer with a pulse on the real estate industry. She continuously seeks to stay in tune with the dynamics of this sector. Her inclination leans more towards real-estate technology and its development. Follow me – @traceykoster_me