I think it is fair to say that for many reasons 2016 is not going to be remembered fondly by many.
The year started with the loss of famous names, unfortunately a trend which seemed to persist for much of the year. It is also a year that began with the novel idea, or as many saw it a gamble, by our political elite of holding a referendum.
The housing market was also firing on all cylinders with investors and second home owners all seeking to get transactions completed before the stamp duty and tax changes came into effect. These changes were a well-planned idea to boost revenue from a buoyant UK housing market. All in all, a sound plan many economists thought, as long as nothing unpredicted happened to the UK economy.
Then as the impact of the tax changes began to subside, Cameron and Osborne’s gamble didn’t pay off, thus leading to a lost Summer and a considerable drop in transactions, particularly in central London and other markets throughout the UK. Only a change in this next Spring will help these markets.
While housing has rebounded more strongly than expected after the Brexit referendum, the level of transactions has dropped considerably and we move forward with a fear that growth in 2017 will be notably slower than the previous 12 months. As we end 2016, we have had to be imaginative and proactive in our attempts to make the most of a reduced market. While sales have been stifled by the ‘let’s wait and see’ approach by many homeowners, these who have decided to sit it out and wait until after Article 50 has been enacted, the more swashbuckling types in the world are taking advantage of low interest rates. Some deals from house builders and less competition on those family homes close to the best schools, not forgetting Help To Buy, now a stalwart of the new homes market and one which needs to remain so to allow people the opportunity to climb the housing ladder. Realising this short-term shift is key to making a success of the first months of 2017.
The first time buyer and the unencumbered purchaser are King in the first quarter of 2017. The battle between soft and hard Brexit undoubtedly have an impact on our ability to make the most of any Spring bounce. As again we will not hit our house building target and the gap is growing rather than shortening, the old “supply and demand” rule of economics will shield the wider market from house price reductions, transaction levels are unlikely to increase in 2017.
That said there will still be competition for quality housing in sought after locations. We can broadly still expect the house price rise through the course of the year although this will fluctuate within microclimates of areas; central London may drop while the outer suburbs may grow. Similar can be said for regional hubs; again access to good road, rail and infrastructure links being the key driver behind regional and local demand.
Our ability to control inflation is one of the biggest battles the government will face in the medium to long term, as the ability to control our inflation rate has a direct impact on interest rates. If these were to rise, the already considerable issue of affordability will become a far bigger cross to bear for many and this will be a dangerous combination. If we are able to champion first time buyers and plot a course which allows us to avoid these storms in 2017, the long term future still bodes well for UK housing. There are treacherous waters ahead but with an eagle eye and a little luck we will weather the storm.