Stamp duty surcharge, supply shortage, EU referendum – 2016 has already been a busy year for the UK property market. With the quietness of the summer and some time passing to refocus on the market, what are the best indicators for a healthy market growth?
1. Rics’ UK Residential Market Survey
The UK Residential Market Survey, which is published monthly by the Royal Institute of Chartered Surveyors (Rics), is seen as a reliable indicator of the state the UK property market is currently in and offers room for forecasts.
The Surveyor’s latest publication (for July) still recorded a growth in house prices. In addition to that, the report is also predicting a new take-off for property prices as early as next year.
Obviously, the polls also revealed some sentiment of shock following the surprising referendum result to leave the EU. The continuing shortage of houses, however, is still a big supporter of stable housing prices. In the latest survey, 5% more participants recorded an increase in property prices than a fall.
In the short time, surveyors still expect prices to turn negative, but the confidence in a rebound is growing across the country. In total, it grew by 23% compared to results from a survey straight after the referendum.
Rics chief economist said: “The rebound in the key 12-month indicators in the July survey suggests that confidence remains more resilient than might have been anticipated.”
But, he added: “It is hard to escape the stark message regarding supply.”
2. Interest rate cuts
Just over one week ago, the Bank of England announced their ambitious stimulus package to secure Britain’s economy from a recession. The Bank decided to cut their rates from their 7-year low of 0.5% to a new record low of 0.25%. This cut also represents the first change in interest rates since the repercussions of the financial crisis hit the market in 2009.
Britain’s property market benefits from this cut in two ways.
Firstly, those trying to save their coins will be earning even less interest. Admittedly, a cut of interest rates by 0.25% won’t make a major difference. But for those trying to grow what they’ve already saved, this latest development might be the tipping point to start considering where else to put those hard earned dollars.
Therefore, this leads to the second and biggest beneficiary; the property investor. The latest cut in rates will attract even more buy-to-let investors to the market. And more newby investors will be tempted to make the final leap and take their funds out of their bank accounts and put them into bricks and mortar.
3. The bigger picture
To completely understand how the UK property market (or any market, really) works, it’s important to look at the bigger picture. Extracting single events like the EU referendum from its circumstances and using it as an explanation for developments in the property market diminishes the power of the property market.
For those who are experiencing the current development in the property market as a result of the Brexit vote and the vote alone, it might be a worthwhile exercise to virtually travel back in time.
You don’t have to go back very far. In early 2016, the capital’s prime property market already experienced a slowdown in property price growth and in investment interest. Then, the additional stamp duty announcement sparked a rush to buy in investors.
The rush was followed by a referendum drought, the same way any other big political decision leaves a market crowded with indecisive individuals who won’t move. The somewhat unexpected result took some time out of people to adjust, which is happening right now, just in time for the traditionally quiet summer break.
With all of these events in mind, the current market doesn’t seem too out of place after all. If anything, it just proves one thing: UK property is a stable beast surrounded by changing factors and varying conditions.