When we get into a New Year many experts are asked to give predictions for their particular market for the year ahead. That may be share or currency specialists, and of course property.
Yet all they can be is predictions based on experience and knowledge of the market. Experts rarely get it 100% right…it is a bit like looking into a crystal ball.
I believe in looking at the facts then giving my opinion of how I see the property market in 2017.
So here we go, let’s list them:
Brexit
I am writing this after the Prime Minister’s speech confirming the terms of the UK leaving the EU. It was a very impressive speech. No messing about. This gives a clear picture for the general public on what the government is trying to achieve. This has an effect on people’s confidence for the future. The speech will give people confidence that the future is bright and I expect that to show in house prices. To date, despite the doom monger’s predictions, Brexit has not had any negative effect on property, apart from in London. I do not foresee this having any major effect in 2017 either.
Currency
This is very important. Many people do not realise it but our currency level is an important factor in much of our everyday lives, from filling the car with petrol to holidaying abroad. A low currency rate is good for exports but bad for imports.
A weak pound makes the British property market very attractive for foreign investors. A lot of these investors see less value in the London and southern markets and have turned their attentions to the big Northern Cities of Manchester, Leeds, Liverpool and Sheffield. Manchester in particular is becoming an investment hotspot for Chinese investors. There is strong demand for new build apartments and I noticed this first hand on a recent visit with a huge regeneration of the City centre with many apartment blocks under construction. I expect this to continue in 2017.
Tax Changes
There are big tax changes coming into force in April 2017 and these will have a large effect on buy-to-let investors. It is a government crackdown with large tax bills looming. Many investors could be looking to either sell or restrict their portfolios. Some are considering moving into other areas like lease options and commercial property. Stamp duty rates for investors are also having a huge effect.
Tired Landlords
Writing from experience, there is a big increase in landlords who have become tired and disillusioned with property investing and are now considering either selling or handing over management of their properties to other investors. I think this is going to be big in 2017, especially in the North.
Many landlords who bought ten to fifteen years ago, have seen no rises in values and many are stuck in negative equity. As their mortgage terms are mainly interest only they have no means to pay the capital value unless prices increase significantly. They are nearing the end of their mortgage terms and they have are having to consider how they can get out now.
Residential Buyers
The big housebuilders are developing as fast as they can. Demand for new homes is high with the government help to buy scheme underpinning this market. First time buyers have been snapping these properties up instead of buying old terrace or semi-detached houses. Who can blame them. I believe this is one of the reasons why such older stock has not increased in value especially in the North East.
Finance
There is no doubt that the tighter lending criteria imposed on the banks by the Bank of England has had an effect. Much has been said on this subject but we cannot go back to the free lending days we had before the crash. This is a more prudent way and this will continue for the future. Buy to let investors are finding it much harder to borrow money and this needs to be considered when looking at the market.
Yield
With savings rates at an all-time low, many investors are now investing purely for yield and a higher return on their money. In the North East where property prices have risen at a far lower rate than the majority of other areas, there is growing demand from investors with cash seeking high yields. I expect this to continue in 2017.
Interest Rates
The forecasters are always trying to predict rates. Many wanted an increase before Brexit only for the Bank of England to reduce them after the referendum result. If the pound stays low and inflation significantly increases, then the bank might have no option but to increase rates. I believe this could happen this year but I do not expect big rises as there is still uncertainty in the economy.
Conclusion
The market in 2017 will be strong in the Northern Cities bolstered by Manchester, Liverpool, Leeds and Sheffield. Foreign investors will continue to invest in these cities for new build residential. New build student accommodation will also be in strong demand. There are lots of these types of developments being built with many more in the planning pipeline. There will be strong demand for new-build residential properties all over the UK. Prices will be stable in the South East and London where yields remain poor. The North East will enjoy good demand from cash investors looking for high yield returns.