Property market predictions 2017: From Brexit to tenant fee bans, we’ve asked London’s biggest real estate agents to look into their crystal balls
2017 will see the rise of Build-to-Rent in London
Mark Collins, chairman at CBRE Residential
Throughout 2017, I hope that SME developers continue to be championed and encouraged by local government, as these housebuilders will play a major role in alleviating the housing crisis. Access to land and financial support as well as flexible planning systems will help speed up SME’s delivery of much needed new homes. Finally, we expect to see institutional investors focus increasingly on the Build to Rent sector, which will continue to emerge as a major real estate asset class in London.
Brexit won’t deter investors in PCL
Stephanie McMahon, head of research at Strutt & Parker
The ongoing uncertainty around the UK’s exit from the EU will slow down market activity across the UK. That said, the continued weight of international money seeking the UK’s ‘safe haven’ status is likely to ensure investor interest for Prime Central London (PCL) property in particular. PCL has historically been the primary driver of national house price growth…we are predicting flat growth for PCL in 2017 as a best case scenario. However, we expect the market to continue to experience low levels of activity as buyers and sellers alike wait for more certainty on the economic outlook.
2017 will get off to a positive start
James Evans, CEO, at Douglas & Gordon
The good news is that transaction levels look like they will be picking up early in 2017. Figures just released by the Bank of England show monthly mortgage approvals increased by nearly 4,000 in October. Mortgage lenders also handed out an extra £800m more than they did in the previous month. These figures are hugely positive considering the significant events that have happened this year. The EU referendum slowed transaction levels, so these boosts to lending are welcome after the roller-coaster year of 2016. Yes, the approvals need to translate into sales, but these encouraging signs from lenders come as we head toward January, usually the peak month for new potential buyers entering the market. This could be exactly what the residential property market needs.
The market is slowing and prices will fall
Fionnuala Earley, residential research director at Countrywide expects
The shock of the EU Referendum vote is still affecting decision making. That’s as much in housing investment decisions as it is with business. The market is slowing and we expect there to be a small fall in prices in 2017. The referendum isn’t the only factor – in London and the South more traditional drivers are behind the slowdown. As prices have risen rapidly in earlier years, expectations of future capital growth have waned. At the more expensive end of the market (over around £1m) the additional costs of stamp duty are making a difference and contributing to buyers’ negotiation strategies helping to moderate prices achieved. The shadow of Brexit is having an effect given the uncertainty about the impact on the economy.
Landlords can expect higher costs in 2017
Jane Cronwright-Brown, head of residential lettings at Savills
The Autumn Statement announced a ban on tenant fees in England with further detail expected in 2017. Though widely welcomed by tenants it does risk unintended consequences. It is unlikely that landlords will be able simply to pass this additional cost on to tenants through rent. Instead we expect it to result in higher costs for landlords, in a sector already facing increased taxation and greater mortgage regulation. That is likely to curb private investor appetite for residential investment and limit the amount of new rental stock at a time of growing demand for rented homes. This supply-demand imbalance will mean less choice for tenants and upward pressure on rents that plays out over a longer period.
EU turbulence will restore the UK’s ‘safe haven’ reputation
Liam Bailey, head of research at Knight Frank
The Knight Frank Prime Central London Index is on course to show a 7 per cent fall in average prices in 2016. Asking prices have fallen more sharply, by 10 per cent or more. A new realism from vendors has led to a modest uptick in sales in recent weeks. While 2017 could well see a continuation of sales growth, don’t expect a return to 2013/2014 levels – successive stamp duty hikes have led to a structural decline in volumes with owners staying in homes for longer – to the detriment of long term tax take. While it is true that the EU negotiations will provide an uncertain backdrop to the London market next year, let’s not overstate it. Compared to the very real potential for political, banking and economic upset in Italy, Germany, France and other European countries in 2017 expect to see the moniker ‘safe-haven’ being dusted off once again for the UK.
More choice on the way for private tenants
Ed Philips, lettings managing director at Foxtons
Landlords and tenants should expect current market dynamics to continue into 2017. With sales market ambiguity prompting more homeowners to temporarily rent their properties and several large-scale rental developments reaching completion, increased supply will give tenants a level of choice not seen for many years. Improved transport links to central London will fuel interest in Zones 3-6, while build-to-rent schemes with features such as leisure facilities, shared communal spaces and manned reception desks will further open up opportunity for renters. Landlords could be forgiven for being uncertain about the short-term impact of increased competition and changes in buy-to-let tax relief scheduled for April 2017, but the long-term outlook remains healthy. London’s status as a global capital of finance, media and technology means capital appreciation will endure and gross rental yields will continue to cover financing costs. We expect investors to achieve double-digit returns through the cycle. Studios and one-bedroom flats will still perform best in terms of returns per square foot, with this holding true for both the lettings and sales markets.
Both rents and house prices will increase by five per cent across London
Jeff Doble, chief executive at Dexters
We are optimistic about the 2017 property market. We are finishing the year strongly and the indications already are that we are heading for a record December. There has been uncertainty this year but we are seeing a resilience to the market and those who have been putting off making decisions are no longer holding back. We anticipate a fast start to the new year with a large number of buyer enquiries. We work for over 20,000 London landlords and, in general, they are upbeat as we continue to generate reliable returns for them. Tenants have had more choice in the last quarter of the year, but the demand for high quality property from corporate tenants is at an all-time high and, as a result, we are seeing a lot of new landlords. We anticipate both prices and rents to increase by five per cent across the capital as demand for London accommodation continues unabated.