Housing: Out with 2016 and in with 2017
16 January 2017
It has been a somewhat uncertain few months for UK house prices – but the good news is that according to Nationwide, property value growth in 2016 has been “stable”, at a rise of 4.5% over. Though 2017 is looking slightly lower with both Nationwide and Halifax tempering their views and expecting growth of between 1 – 3%, largely driven the prospect of falling prices in London (London growth for 2016 ended up below the national average) but fear not £450,000 starter homes are on their way!
Forget London and move outside the M25 – Luton outperformed the market with prices growing by 19.4% (mainly due to people moving out of London into the commuter belts). Sadly head very north to Aberdeen and prices decreased by around 6.9% – Yorkshire came off really well, which is good news for me.
The rocky year of 2016 was driven by a few different factors. In April, the stamp duty threshold for buyers of second homes or buy-to-let properties was lowered to £40,000 and a 3% surcharge was introduced. By November, these changes had brought in half as much money as the Treasury expected and were blamed for a steep decline in property sales, at a cost of nearly £1 billion to the UK economy. Then there were the months of uncertainty surrounding Brexit, following the UK’s decision to leave the European Union, which sent share prices and profits of many estate agents and housebuilders tumbling.
Brexit is likely to be a big talking point for 2017 as well with the triggering of Article 50. As with any trading market, uncertainty breeds caution and indecision, and as such we can expect continued low levels of activity therefore a dampening on any potential growth. London will certainly be one area to watch this year – any Article 50 impact will certainly be seen in London.
That is what is happening in the market but what is happening with the housebuilders? Well Bovis issues a profit warning, seeing shares plummet 5%, though this was blamed on operational reasons rather than the market. However Redrow has predicted 200,000 homes will be built this year (I’ll wait in baited breath!) but that the million homes by 2020 is unachievable due to skills shortages.
Which brings me to one of the solutions being offered up by the Government, the £60m Community Housing Fund boost by Barwell. The money will be spent in areas where second home ownership is high and therefore the cost and affordability for others is hampered. The money will be used to deliver affordable housing in 148 council areas.
So we ended 2016 with house price growth that was stable but the uncertainty in the economy will see a slowdown of growth in 2017, with experts suggesting 1 – 3%. This uncertainty will keep housebuilders optimistic albeit slightly cautious but let’s not forget ongoing demand for housing continues to under pin the new-build market. From the Housing White Paper expected in January, which promises to set out “radical” plans to boost housing supply, to the last Spring Budget in March, at which the Government is facing pressure to reduce stamp duty – not forgetting the expected triggering of Article 50 shortly thereafter – it seems fair to say that the year ahead will have its fair share of market-moving events.