A ‘tale of two countries’ has been predicted during 2016 with national price increases of up to 10% across the UK but closer to 4% in London.
The top end of the property market, particularly in London, will see a price correction in 2016 because of the impact of stamp duty, consisting of a 10% drop in value for homes over £1 million. However this will have no bearing on the core property market, which will experience further average price increases in 2016 of up to 10% across the UK. On paper it will look like a tale of two countries as London will see an increase of around 3-4% due to the top-end market correction.
There are around 29 buyers chasing every property listing and an abundance of mortgage providers but the problem remains a lack of appropriate stock. Unless the government takes drastic action to drive either private or public sector house building the situation is not likely to improve next year. The issue could develop into a serious social one if young people continue to be driven out of our major cities. This demographic is most likely to provide energy, vibrancy and new ways of thinking so our major economic hubs like London are at real risk if property becomes unaffordable for all but the super-wealthy investors.
The rental market will also be blighted by a lack of stock with families renting in cities needing to move out and commute in to their previous base in order to find something they can afford. We predict there will be an increased sale and rental premium on three-bedroom properties due to the high demand for these. My advice to buy-to-let investors is to invest in these types of properties now as they will achieve a very strong yield in 2016.
We’ve seen no real evidence of a Northern Powerhouse emerging as yet, but people will be driven out of cities like London, Bristol and Cambridge to the regions as a direct result of lack of property stock and rising prices. If we see the right investment in the Northern Powerhouse it could well take off and we should know more about this after the Spending Review toward the end of November.