Over the last few weeks we have seen a constant flow of comments from “experts” suggesting that the UK property market is overvalued and ripe for a correction. These comments and suggestions are not new but investors still seem drawn to the UK property market with many looking to buy on weakness. Sometimes it is easy to forget how strong the UK property market is especially when compared to overseas counterparts.
Economic crisis
It would be wrong to suggest that all parts of the UK property market have recovered but there is no doubt that while London leads the way many others have picked up in recent times. This performance has occurred against a background of economic troubles around the world which have forced historically low interest rates. While many will say that low base rates have fuelled cheap finance this argument conveniently forgets the reason why base rates are so low.
The London property market is back above pre-2008 highs and while there is constant criticism of property valuations in the capital it is still attracting significant overseas interest. So, the UK property market has performed admirably against a difficult economic backdrop?
Political uncertainty
The Conservative/Liberal Democrat coalition was not easy and despite winning a majority at the last general election the current Conservative government is under intense pressure. A number of bills have been blocked in the Houses of Parliament, there is pressure on David Cameron and the recent leak of 11 million confidential papers from Panama has caused more political uncertainty. However, even against this difficult political backdrop the UK property market still retains the confidence of domestic and overseas investors.
There is definitely more political uncertainty on the horizon as we approach the European Union referendum on UK membership. Historically this type of political uncertainty would have troubled property investors in the UK but at this moment in time they seem relatively unmoved by the issues ahead.
Increased taxes
Whether or not you agree with increasing property related taxes to cover government budget deficits there is no doubt that this constant milking of the property market has taken money out of the market. The recent attack on the buy to let sector prompted a backlash from investors but many still piled into the market ahead of the recent stamp duty increase. So, while there is no doubt that property related taxes and investment costs continue to rise this has not stopped investors from ploughing more money into UK property.
It will be interesting to see whether the UK government has now pushed the recent increase in property related taxes as far as it can for now. Those in the higher echelons of the UK government seem to have forgotten that the UK housing market needs buy to let investors perhaps more than buy to let investors need the UK housing market.
Conclusion
Any one of the above issues could easily create uncertainty amongst UK property investors never mind all three occurring together. So, if we take a step back and look at the UK property market from a distance the performance has been nowhere near as challenging as many would have you believe?