Ashley Osborne, Head of UK Residential at Colliers International
At the start of each year, our clients and purchasers are always looking to understand the effect of the political, economic and global landscape on the market in order to help them make fundamental decisions. The year ahead is likely to see significant political change withPresident Trumps’ inauguration later today and Theresa May’s confirmation that the UK will leave the Single Market as a result of the outcome of the BREXIT referendum.
We cannot ignore the fact that the democratic decisions made on both sides of the Atlantic in 2016 will have indeterminate consequences on the residential market this year. Uncertainty is likely to continue due to these events but in reality, nothing has materially yet. So what do we expect to see in 2017?
- Latest research undertaken by the Purchasing Managers’ index (PMI), a survey from IHS Markit, suggests that much of last year’s lost confidence is steadily now recovering. Construction firms increased their output in December 2016 at the fastest pace since March – before the stamp duty hike on landlords, and before the EU referendum, largely due to residential demand and orders for residential property were particularly high in this month.
Figures from the Bank of England also reveal a rise in mortgage lending with over 67,000 home purchase mortgages being approved in December, meaning that house lending is up by 10 per cent on the low level of 61,359 in August, shortly after the Brexit vote. The market hasn’t yet sprung back into the hay day of January 2016, when buy-to-let investors were eagerly snapping up property before the stamp duty legislation came into force in April. However, signs are certainly brighter and the market appears to be pushing ahead, despite any negative political undercurrents.
In addition, The Royal Institution of Chartered Surveyors (RICS) has recently forecasted that UK house prices will see an average increase of three per cent across 2017, due to lack of supply, which will continue to push prices up. Overall, we predict that there will be a return of calm to the market as buyers start to realise that BREXIT is not going to force the market to collapse.
- We have been witnessing a surge in overseas buyers in the residential sector since the EU referendum as the pound remains weak against most other USD denominated currencies and we expect there to be an Influx of new international money once Article 50 is triggered. We are particularly seeing interest from traditional core markets such as Singapore, Malaysia and Hong Kong. As well as emerging markets such as China and more recently India.
- We anticipate there may also be some tweaks to Stamp Duty during the course of 2017 as the government seeks to stimulate the construction industry particularly post the issue of Article 50.
Only time will tell what the residential property market has in store for investors in 2017, but one thing’s for sure, if 2016 made history, 2017 is going to be an even more monumental event. Theresa May is seeking to create a ‘global Britain’ which is stronger, more buoyant and respected around the world. So in light of this, the UK too needs to be remain poised, ready and as optimistic as can be for the changes that lie ahead. Confidence will create possibilities and greater investment, and central London, being an international hub, will be sure to benefit.