What can we expect from the housing market in 2017?
As I reflect on 2016, it is hard to believe everything that actually happened. If last year was a movie, the strap line would be: ‘2016: Expect the unexpected.’ With the introduction of a higher rate of stamp duty, the EU referendum result, the upcoming removal of letting agent fees and the removal of tax relief on mortgage interest for buy-to-let properties (and these are just for starters) there really has been a raft of changes ushered in to the property industry.
So what will 2017 be remembered for in the years to come? What can we expect from the housing market this year?
As far as 2016 goes, house prices showed remarkable resilience. Uncertainty from the EU referendum result and the changes to stamp duty could have had more of an effect. Strong buyer demand coupled with a shortage in the supply of homes was a major contributor to price levels remaining steady. As of October 2016 the Land Registry reported the average house price in the UK as £216,674, a rise of 6.9% compared to the previous year. Can we expect similar growth in 2017? The Royal Institute of Chartered Surveyors (RICS) predicted a 6% increase for 2016, and for 2017 the forecast is certainly more cautious at 3%.
The key factor affecting all aspects of the property industry is housebuilding. The latest government figures show that in 2016 just under 190,000 homes were built in England. And although yes, this is the highest number post the financial crash of 2008, it is still not the amount needed to satisfy demand. As a consequence an increase has been predicted in the asking prices of both properties for sale and rent in 2017.
In Manchester the current growth in new projects is explosive with countless new developments underway. There are over 10,000 properties with planning approval in the city centre alone. Slightly further out there is also plenty in the pipeline, such as this brand new development in Blackley.
With a spike of buy-to-let completions at the beginning of 2016 before the increase in stamp duty came into effect. Some parts of the country saw an increase in the number of available rental properties in the second half of the year. According to Homelet, this increase in supply slowed the growth of asking rents in the UK to bring about an average annual price variation of 1.6% by the end of 2016.
With new tax changes set to come in this year and a fall in buy-to-let activity predicted, rental stock is anticipated to fall short of demand again in 2017. RICS foresees rents increasing by between 2-3% across the UK. Fallowfield branch manager Steve Curley commented, “The recent announcement in the Autumn Statement of £7 billion of funding across the UK going towards the building of more affordable homes is very exciting for the future of the industry. However in the meantime, while construction takes place there is still an ongoing shortfall of stock. This is likely to have an affect on house prices and also rents.”
Buy to let
The buy-to-let market was hugely overshadowed in 2016 by April’s stamp duty changes. HM Revenue & Customs reported that in March of last year there were 162,000 property transactions. When you crunch the numbers, this is a rise of 77% year on year. In the same month the Council of Mortgage Lenders (CML) reported that 29,300 mortgages were approved for landlords, more than treble that of March 2015.
RICS has forecast that the transaction activity this year will be around 1.15 – 1.2 million, just below the 1.25 million for 2016. As this year also marks the start of the withdrawal of tax relief on mortgage interest the CML has said it expects any activity in the buy-to-let market to slow.
Investors are unlikely to lose their appetite altogether for portfolio expansion and if you know where to look, the right investment opportunities are available, such as Quay House in Salford. The North-West is one area in particular that many experts have predicted to outperform the rest in 2017.
In the current property climate it is now more important than ever for landlords to seek specialist advice from knowledgeable industry professionals. At homes4u we have a dedicated compliance team in place to make sure that investor properties are fully compliant with all the latest government regulations.
If you are looking for a property to let or buy, please visit our property search pages where you can view all our current availability. Or if you are considering an investment in property in the Manchester area, visit our new developments page to see all of the latest instructions we have to offer. From all of us at homes4u, all the best for 2017!
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