Record-Breaking January for Property Market
Halifax, in their recent newsletter, revealed that a boom in property activity has brought the annual price growth figure to 4.1% the highest since February 2018.
For a time when transactions normally slow down this is a hugely positive indicator for a good year in property. In this article we wanted to go over what is happening with the market at the moment and how this has been building up for some time now. When we look at what makes the market move in a particular direction we need to check for any fundamental or sentimental changes in the climate. In this case we had both that were very heavily linked. We have covered aspects of these shifts in previous updates and articles but here we will consolidate the news so we can get a better picture of how the housing market will look for the rest of the year.
When we look back at news that may have affected the housing market it is hard to think of a bigger event in the last few years than Brexit. As we all now know, Brexit created a lot of uncertainty in the UK economy largely due to the fact a deal consistently failed to be agreed both within our own government and with the EU. Since the referendum property transactions dropped by 9% when compared to figures from early 2016, this has led to the market staying largely stagnant during this time. This decrease occurred despite the fact that Brexit had very little to do with general property transactions. While similar trends were seen in equities markets and the economy as a whole, these institutions are heavily dependent on the UK’s relationship to other countries. Here we have an example of the power that negative sentiment can have on a market.
If we look at fundamental changes in this same time, we saw increased legislative pressure on landlords after many years of exploitive and amateur landlords giving tenants a hard time. These included caps to tenant’s deposits and scrapping of admin fees, which everyone at Fielding has proved doesn’t effect property investment’s viability at all. One fundamental problem that has caused the government endless hassle for many years longer than Brexit is housing supply.
For a few years now the target for new homes being built to keep up with demand is 300,000 which the government has failed to reach since it was set. This continued lack of supply has pushed demand up and up in this time, due to lack of activity prices were never pushed up in the way we would expect. So, we always knew that if people returned to the market it would release that pent-up demand. This is what we saw this January. Whatever your opinion of the election result you cannot deny it was resounding. The unanimity between the populace was just the sign people needed to think more positively about the UK economy.
So, what will happen now? When looking into why people had stopped in the first place, research by companies like ‘propertywire’, found that most people were waiting for Brexit. Their findings also showed that participants believed the market would return to normal after we had left the EU. This is all evidence that sentiment is strong for the market to continue its upwards trajectory. Next, we need to look at the fundamentals. In terms of Brexit, the whole deal has ended up changing very little, so we can keep an eye on any changes but for now can disregard its affect. Some of the aforementioned tax changes will finally come into place at the end of the fiscal year but apart from that there is little change. Overall, as long as this period of positivity continues and as people realise that Brexit isn’t that much of a big deal sentiment will stay strong, unaffected by the small fundamental changes.
If another party had won the election we might have expected more of a shakeup but since the Tories have been in power for almost a decade now and had already laid out their plans, we don’t think there will be any surprises. In summary, the outlook looks positive, and while we can never know for sure, we are fully expected a great year based off on this booming January.