Read on to find out what is expected for the property market in 2017 as well as a look back at 2016.
A look back at 2016
2016 started strongly, especially in the lower to middle range of the UK housing market. This lasted up until the 3% stamp duty surcharge for anyone buying an additional property was introduced at the beginning of April and following this the residential property market slowed with prices cooling across most parts of the country.
Property values increased by 4.4% year-on-year in November, the weakest annual growth for 10 months, the latest figures from Nationwide Building Society show.
House prices edged up by 0.1% month-on-month in November, taking the average property value across the UK to £204,947, which is in line with growth rates seen since early 2015, supported by the widening supply-demand imbalance in the market, improving job prospects, increasing wages and record-low borrowing levels. But the dominant factor affecting the housing market was and remains Brexit-related uncertainty.
2016 has been an action-packed year with the surprising outcome of the EU referendum, a new prime minister and Donald Trump winning the US presidential election. These events have led to widespread uncertainty in the UK property market.
2017 House prices
Based on recent forecasts, the general view among agents is that residential property prices in the UK as a whole are likely to be flat or possibly rise marginally in 2017, although some agents are more optimistic on seeing a return to sustained price growth in 2018.
Savills forecast that average UK house prices are expected to remain stagnant in 2017, before increasing by 2% in 2018 and 5.5% in 2019 to a total of 13% by the of 2021.
A supply-demand imbalance means rents will outperform house price growth, rising 19% over the same period, the property agents said.
The number of residential property transactions increased by 1% in October compared with the previous month, according to the latest HMRC statistics.
In total, there were 97,640 residential transactions in October, but while this was up on September, the data also shows that it was 8% lower year-on-year and significantly below the 165,480 recorded in March 2016, highlighting the unpredictable nature of our housing market.
Marc Langdon, Partner of Bidwells, pointed to the inevitable rush of people trying to secure buy-to-let properties before April's stamp duty deadline as evidence that the market was 'firing on all cylinders' but it also led to market distortion, as reflected by the spike in transactions in March and slump in April, while the Brexit vote added to the uncertainty.
Langdon continued: "As the impact of the tax changes began to subside, Cameron and Osborne's gamble (the EU vote) didn't pay off, thus leading to a lost summer and a considerable drop in transactions, particularly in central London and other markets throughout the UK."
He believes that only a change in stamp duty in the spring Budget 2017 will help the market, a change which failed to materialise in the Autumn Statement, but one which should be considered if transaction levels in the middle price bracket of the market fail to pick up.
Whether the government's target of building 1 million new homes over this parliament is a realistic one remains to be seen, but either way more needs to be done to increase the supply of much needed new homes across the country, which includes alleviating the challenges and obstacles facing residential property developers, according to the NAEA's Managing Director, Mark Hayward.
The failure to construct enough homes to date means that Britain's housing shortage has now reached crisis point, with the number of prospective buyers and renters dramatically outweighing the volume of homes on the market, while restricting the level of housing stock sales and letting agents have to offer.
Better return on investment up north
Plans for the Northern Powerhouse scheme, designed to rival London and the South East as the main driver of economic growth in the country, by pooling the strengths of the cities and towns of the north as one cohesive unit, remain intact despite the UK's decision to leave the EU and the fact that the David Cameron is no longer prime minister, while George Osborne, the now former chancellor and the man behind the Northern Powerhouse idea, was sacked by Theresa May.
"Building the Northern Powerhouse is a long-term government priority and central to our plans to rebalance the economy," said Andrew Percy, who replaced James Wharton as Northern Powerhouse minister in Theresa May's reshuffle.
With the plans for the Northern Powerhouse in full flow and the housing market in London currently being outperformed by other regional cities, a growing number of property investors, including buy-to-let landlords, are turning to other major town and cities in the north of England which tend to offer greater yields and potentially better prospects for capital growth, according to Stuart Law of Assetz:
"The UK's rental sector has experienced a sea change over the past year as canny investors recognise that the North, not London, is where the best yields can be found," he said. Law continued: "2016 saw buy-to-let investors begin to sell up in London and this could grow to a rush in 2017, but rather than leave buy-to-let we expect them to reduce mortgage debt and buy more for cash or with smaller mortgages in higher yielding locations around the country like Manchester, Leeds, Birmingham and many other regional cities."
Leeds had the highest rental yield in the UK in 2016 and due to the new airport and HS2 plans the city is set to outperform other areas.
The UK will begin the New Year with an uncertain future ahead, dominated by yet another landmark political event in the triggering of Article 50 of the EU's Libson Treaty, which Prime Minister Theresa May has said will happen by the end of March 2017.
"The biggest talking point in 2017 will be triggering Article 50 to begin the process of Britain's exit from the EU, and what immediate effect this might have on property prices and the value of sterling," said Camilla Dell, Managing Partner at Black Brick.
Stamp duty reforms implemented by the government have slowed the housing market and raised half as much money as the Treasury predicted, and so it is unsurprising that there are calls for the government to review the tax.
The fact that there is no stamp duty charged under £125,000, then 2% up to £250,000, and 5% up to £925,000, may have helped activity levels at the lower to mid-segment of the housing market, but the 10% levy to £1.5m and 12% above that has had a negative impact at the top-end of the market, best illustrated by the slump in home sales and prices in London's prime areas.
The introduction of the 3% stamp duty surcharge on buy-to-let properties and second homes has also contributed to the sharp fall in property sales."Disproportionately high stamp duty levies introduced in the last two years have done considerably more damage to the market, its associated industries and the supply of new homes than anything else, including an impending Brexit," said Edo Mapelli Mozzi, CEO of Banda Property.
While the housing shortage persists, interest rates look set to remain at ultra-low levels for the foreseeable future, and so it is not surprising that the general consensus is that property prices will remain broadly stable across many parts of the UK in 2016, albeit with a few price rises and falls in certain areas.
The ongoing uncertainty around the UK's exit from the EU will undoubtedly slow down housing market activity across the country in 2017, while creeping inflation and the pressure that it puts on goods and services as well as interest rates could also have a big impact, but ultimately the severe shortage of UK homes means prices should remain steady. Unfortunately the same cannot be said for transaction numbers. Not unless there is a significant change to the existing stamp duty rules and suddenly more certainty on the economic outlook.
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