Last year was dominated by ongoing Brexit uncertainty, political turmoil and sluggish growth across the board – so much so, that confidence in the property market was low in 2019 as activity in the housing market waned.
And, as there is still some uncertainty over when Brexit will be finalised, it’s difficult to predict what the knock-on effect will be for property prices in the coming year.
However, the recent re-election of the Tory party – which Boris Johnson claimed has given his party a ‘powerful mandate to get Brexit done’ – may have banished the property market jitters.
But what are the current predictions for the property market in 2020? Here at The Moving Hub, we take a closer look…
Despite average stock levels hitting an all-time low and stretched affordability in parts of the country last year, the decisive Tory victory suggests that property prices will rise – albeit modestly – in 2020. This is according to forecasts from the vast majority of property industry analysts working for portals, consultancies and estate agents.
According to Zoopla, London prices will rise by 2% over the year, but price growth may be constrained by affordability factors. It says the affordability of housing across the country will dictate the level of price increases, but northern cities will benefit more than those in the south.
Rightmove shared a similar view, stating there will be regional variations. The portal claimed London is ‘finally showing tentative signs of bottoming out’, and it expects a more modest price rise of 1% in all southern regions where buyer affordability remains the most stretched.
However, Knight Frank predicts that the capital will not see any price rises this year, but the rest of the UK will start a longer-term upward shift in prices. The agency anticipates that values will rise by up to 4% annually until the end of 2024. It also expects some landlords to sell up due to controversial and widespread buy-to-let tax changes.
Savills tops the figures up with a five-year forecast, saying north west England will see prices rise six times faster than those of London by 2024.
Meanwhile, JLL says this broadly positive outlook for the housing market aligns with the forecast for the national economy, with GDP growth estimated between 1.7 and 2% per year until 2024.
However, while forecasts are positive across the board, 2020’s housing market is still due to fall short of capacity, and the factors to allow it to return to full health will only be in place when Brexit is finalised.
The outlook for property sales in 2020 is also positive. Figures from HMRC revealed that residential property transactions rose marginally in November to reach 102,050 – up 3.2% year-on-year.
This figure remained generally consistent, but greater political certainty is expected to lead to a slight increase in property sales this year.
Although the Brexit cloud continues to loom, real estate consultant Garrington Property Finders agrees that December’s decisive election result has done ‘wonders for sentiment in the market’.
Many experts agree that there will be growth in transactions during 2020 due to what some are describing as a ‘Boris bounce’ in the economy. As we break away from political ambiguity, we will begin to see a healthier housing market, which should see buyers and sellers coming out of the woodwork.
In fact, demand across the UK from prospective buyers rose by 28% in the four days after the election compared to the same four days in 2018, with the biggest jump recorded in London (up 54% year-on-year), according to Rightmove.
On the flipside, RICS predicts that there will be little change in sales volumes for the year ahead. Instead, the surveyor trade body is calling for the government to start prioritising housing policy in order to boost activity in the market and create favourable environment for housebuilders to help address the housing crisis.
Private Rented Sector
The strong demand from tenants coupled with a shortage of properties available to rent has led to notable rental price increases across the country, with the average cost of a rental home in Great Britain rising by (2.1%) year-on-year in November to £989 pcm, according to data from Hamptons International.
HomeLet adds that the drop in the number of landlord purchases over the past year – owed mainly to tax and regulatory changes – has also contributed significantly to this decline in the volume of homes available to rent.
As the sector continues to struggle with a lack of supply, the RICS survey data suggests UK rents will rise by 2.5% this year, and rents in London are expected to increase at an even faster pace of 3%.
While the rent rises are good news for landlords, the rental market is predicted to be even more challenging for buy-to-let landlords in 2020, with policies such as the proposed scrapping of Section 21 of the Housing Act and reforming the grounds for possession, as part of a new Renters’ Reform Bill, likely to discourage some investors.
UK based estate agency Carter Jonas says that frequent policy changes and financial pressure on landlords has left many concerned that their investments are no longer viable. The tenant fee ban and continuation of tax relief changes has deterred investors from the market in 2019, and this may well continue into 2020.
The supply-demand gap is also predicted to widen this year, with 61% of agents believing that demand will continue to rise, while 68% think the number of landlords in the PRS will decline in 2020.
Knight Frank’s five-year rental forecast is that rents will rise by an average of 10% in the UK, led by a 15% gain in London over the same period.
As ever, trends in the property market are always hard to predict, but with market confidence and sentiment set to improve as a result of last December’s election, as well as the prospect of a final Brexit outcome, it’s likely to be an interesting year.
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