A new analysis has revealed that Britain’s housing market is expected to remain reasonably strong and active.
JLL’s recent forecast said that, whilst there might be some turbulence in the market between triggering article 50 in March 2017 and actually leaving the EU in 2019, the residential market will then pick up again from 2020.
“Demand will be undermined in the short term by uncertainty and a more subdued economy while supply issues will exacerbate, lending support to prices. The perennial issue for the housing industry remains supply and we are pleased that there seems to be fresh impetus in this regard,” the report says.
“The big question, however, is whether policy initiatives target short term supply improvements, or look beyond the immediate horizon to create lasting, long term solutions,” it adds.
JLL forecasts the following growth: 0.5% across the UK in 2017 and 1% in 2018 followed by 2% in 2019, then 4% in 2020 and 5% in 2021 but there is regional variations. Scotland is expected to be flat in 2017 then see 1% growth in 2018, 2% in 2019, 3% in 2020 and 4.5% in 2021. Wales is expected to do less well but catch up by 2020 with a forecast of prices falling by 1% in 2017, up 0.5% in 2018, up by 1% in 2019, by 3% in 2020 and then 4% in 2021.
Greater London more specifically is expected to experience the following growth: 1% in 2017, some 2% in 2018, then 3% in 2019, 5% in 2020 and 7% in 2021 but the prime central London market will not see as much growth with the JLL prediction showing prices likely to be flat in 2017 then 1% in 2018, 3% in 2019, 5.5% in 2020 then a slight reduction to 5% in 2021.
Neil Chegwidden, the head of JLL residential research, explains the situation in more detail: “Much will depend on the trade agreements negotiated, but with greater certainty the economic outlook should brighten along with consumer and business confidence as we head into 2019.”
“We expect the UK housing market to be more subdued over the next two to three years. However, it will remain reasonably active with little chance of meaningful price corrections. Assuming Brexit negotiations are not too detrimental, we could see a rebound in London housing markets in 2020, before the rest of the country follows,” he explained.
One major concern is that the level of house builder activity could drop rather dramatically.
“Although levels of new housing delivery were still woefully low prior to the referendum at least the direction of travel was positive and encouraging. This will now fall back again. We are predicting England starts to drop to 134,000 units next year,” Chegwidden explained.
“In London, we expect the house building slowdown to be more marked. Not only is London’s economy more vulnerable to Brexit but the housing market is also more reliant on investors, both domestic and international, and is hence more susceptible to buyer confidence,” he pointed out.
Furthermore he explained that the short term London supply prognosis implies that prices could bounce back when confidence returns.
“The work stream of new supply should then pick up, albeit slowly. While central and local government policies will be pro-development, we question whether they will really be able to outweigh the more cautious approach adopted by house builders in response to weaker market forces. Most worryingly, both the UK’s and London’s housing shortages will be even more acute by this point,” he added.
Finally, the report outlines that the next five years are – at the current stage – particularly uncertain as so much of it depends on the nature and detail of the EU exit.
“Despite this, the economic prognosis is not too detrimental for the UK. There is clearly downside risk to this quite benign outlook, if trade agreements and financial sector passporting rights are not favourable. However, this base assumption also implies that there is significant upside potential too, so the economy could prove more robust next year and could also expand faster thereafter,”the report concludes.