Brexit left the British property market somewhat unpredictable during 2016. Here's what our resident property expert Ned Browne foresees for the market in 2017. 

How did 2016 leave the market?

how did 2016 leave the housing market

Property prices confounded expert predictions in 2016. Despite the surprise Brexit vote, according to Nationwide Building Society, average prices rose 4.5 per cent during 2016.

Indeed, Halifax reported a £4,000 surge in prices in December alone, reaching a new all-time high average of £222,484.

To a certain extent, property prices defy logic—clocking in at 5.81 times average earnings (just below its July 2007 all-time high of 5.83). For many, particularly the younger generation, the prospect of owning their own home is nothing more than a distant dream. But there are numerous reasons the market is likely to remain robust.

The first is a simple case of supply and demand. The completion rate of new homes has been below the various targets set governments for decades. For example, in 2015, there were 170,730 new homes built, well below the consensus requirement of 250,000. 

In certain areas, such as London, the shortage of housing is chronic. Furthermore, most developments in the capital have been built with no intention of addressing the housing crisis. Rather, they have been built with profit maximisation in mind. Take the Nine Elms Development in and around Battersea Power Station—properties in the Power Station itself start at £1.39m.

 

Foreign investors

Another factor has been the collapse in the value of the pound post-Brexit.  On the day of the referendum—23rd June 2016—£1.00 bought you $1.49. At time of writing—15 January 2017—£1.00 buys you just $1.21. 

This has made property much cheaper for foreign investors who have been taking full advantage of this effective reduction in price.

 

Buy-to-let investors holding firm

Higher taxes on buy-to-let investors seem to have backfired too. 

The additional 3 per cent stamp duty levied on additional property purchases may have put some off acquiring new stock. But it’s also encouraged investors to hold onto their current properties, in the knowledge that re-entering the market is now an expensive business.

The end result is that there's a shortage of properties in most areas of the country, in particular, more desirable areas with high levels of employment.

 

What does 2017 hold?

terraced houses

The much-respected Royal Institution of Chartered Surveyors has suggested house price growth will slow to 3 per cent. Savills, the estate agent, has predicted a flat market. 

Nationwide pitched in with a 2 per cent price rise prediction. Halifax, on the other hand, has hedged its bets and gone for a 1 per cent to 4 per cent growth in property prices.

As such, a general consensus is emerging that prices will rise, albeit at a slower rate. This is probably no bad thing. 

A fall in property prices will stop lenders lending and would almost certainly pre-empt or contribute towards an economic downturn. Whereas further astronomical property price rises could further fuel the rise in social and generational divide.

So, I guess I should nail my colours to mast—I’m going to predict a 2.5 per cent price rise in 2017.

 

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