The Conservative election victory may produce better days for the housing market, just like the stock market, which has seen a terrific bounce, but there are doubts this can be sustained.
Reports in the press encouraged by estate agents are lauding the idea of another property boom in the wake of this remarkable election result, but some market analysts are urging caution.
According the Royal Institute of Chartered Surveyors (RICS) a so-called “Boris bounce” will likely produce a short term improvement in sentiment and thinks Simon Rubinsohn, its chief economist, “But I don’t think it will amount to a great deal,” he has said.
The Brexit trade negotiations, far from being over, are just about to begin in earnest, which could mean continuing uncertainty and a bumpy ride throughout 2020. Affordability remains a big issue, which RICS says “means the likelihood of a material pick-up in activity during 2020 seems unlikely.”
RICS and Knight Frank are predicting a modest growth of 2% over 2020, with sales volumes “broadly flat”, whereas the Halifax and Zoopla are predicting between l% and 3% growth. Savills is more cautious at just l% growth.
There is likely to be a boost in purchases by overseas buyers ahead of the introduction of a 3% surcharge on foreign purchases, expected to be announced in the Spring Budget, however, London growth is expected to trail that of the rest of the country. There, property prices are still high, but cheap money is maintaining the capacity to buy.
The rental market should fair better: growth here is expected to outstrip housing price growth throughout 2020. RICS sees around 2.5% rental growth being achieved nationally, with perhaps around 3% in London.
Longer term, Knight Frank sees increases of 10% over the next 4 years nationally, and 15% in the Capital. Landlords selling following a period of tax increases, mortgage lending restrictions on buy-to-let portfolios, and more onerous letting regulations means that supply is diminishing.
Some experts are prediction “runaway rents”, increases because of this reduction in supply which would put increasing burdens on the young, unless the new government can introduce reforms quickly.
Longer term Knight Frank makes bold predictions, with national prices rising by 15% to 2024, and by 18% in prime central London over the same period.