There’s no doubt political and economic uncertainty over the past three and a half years have held back growth in the housing market. Lack of clarity over if, when and how the UK will leave the EU, and the resulting impact on property values, have caused many prospective home buyers and sellers to sit tight and wait. The volume of transactions has fallen sharply and price rises have slumped. But with the December election returning the largest Conservative majority since 1979, two of the greatest uncertainties have been removed – the Tories look set for five years in office and Brexit is on its way. So what does this mean for the property sector?
A Boris bounce
At least in the short term, the election result may well be the shot in the arm the market has been waiting for. Greater confidence in our economic direction should help release pent-up demand as previously hesitant buyers and sellers jump back in with more conviction. A new year bounce will see more properties coming onto the market and more buyers for them, accelerating the number of moves. Property professionals predict sales over the coming months will reach their highest level since the beginning of 2017.
As Ian McKenzie, CEO of the Guild of Property Professionals, puts it, “The result of the general election has finally provided the population with clarity regarding the Brexit hurdle...meaning we can move forward as a country and the market can settle into a new normal, which should see activity start to improve as buyers and sellers return to the market.”
Modest price rises
But while home sales are projected to rise steeply, house prices may not follow suit. A surge in supply will also put downward pressure on pricing, and underlying challenges remain for first-time purchasers raising deposits. Both The Royal Institution of Chartered Surveyors and property website Rightmove predict price gains in 2020 at around 2%, with the Halifax forecasting between 1-3%. Modest growth, but nonetheless more than twice that recorded over the past year.
Specifically in the South West, where the latest government figures suggest a steady rise in house prices, outpacing the vast majority of the country, the prospects for a healthier, more stable housing market look to be well set.
Throughout the election, the Conservative Party stressed its support for homeownership, appealing to both those with a home and young people with aspirations of buying. Much was made of a cut in Stamp Duty during Boris Johnson’s leadership campaign, but a similar promise was conspicuous in its absence from his manifesto. Meanwhile the party reiterated that the Help To Buy scheme will be scaled back from 2021, and end in 2023.
The Government has said it will review policies to promote ownership, in particular getting banks and building societies to offer lifetime fixed rate mortgages. Mortgage products of this kind are common in other countries, where they’ve helped bring both stability and affordability. But there are structural barriers to be overcome in the UK, and it’s not clear how the Government intends to overcome them.
Whatever the positive language, it seems we’ll probably have to wait until the new government’s first budget in March to learn what plans it really has in practice.
A longer term outlook
Longer term, a stronger government should lead to greater optimism and stability in the housing market. But economic uncertainty will remain until a trade deal is agreed with the EU. It’s unclear what will happen when the transition period finishes at the end of the year and what the lasting impact of Brexit on the economy will be. It’s therefore almost impossible to predict the potential knock-on effect for property prices and the sector as a whole in 2020 and beyond.
In general, however, many people believe buying a home in the South West is a safe investment, and there’s plenty to suggest that remains the case. Buying a property should be regarded as a long-term investment and, even when there’s a short-term price drop, house values will probably stabilise and rise over time. According to a recent report compiled by the Centre for Economics and Business Research, whatever the short term uncertainty, house prices are likely to rise by around another 50% over the coming decade, making homeownership as desirable today as it always has been.