When you strip away all of the political comment, biased views and return to the cold hard facts surrounding the UK property market, what actually moves markets? Despite some less than complimentary headlines about Brexit the UK property market is still showing positive house price growth. There are areas such as London which are struggling at the moment but past performance in London has far outstripped the rest of the UK for some time. So, what actually moves the complex beast which is the UK property market?
Demand from investors
It is obvious that demand from investors will move the UK property market. At the moment there is evidence to suggest that some investors are sitting on the sidelines waiting for that moment to pounce when perhaps Brexit fears peak. As a consequence, in theory as there is less demand for properties on the market this should introduce a degree of weakness/slowdown in house price growth.
Stock for sale
The amount of properties for sale in the UK has a major impact upon property price movements. In the good times, and to an extent the not so good times, sellers will retreat to the sidelines awaiting that opportune moment when buying interest peaks. The lack of suitable properties on the market across the UK is a subject which is often overlooked but one which is extremely important – this has been a decades old problem.
Private rental market
Buy to let investors have been under the cosh for some time as the government continues to increase taxes and tighten regulations. There were early indications that some private landlords would be liquidating their assets as they had quite simply “had enough”. However, there is evidence to suggest otherwise with rent rates still stable (in some cases moving higher) creating strong long-term income streams.
Those landlords “in it for the long term” are unlikely to cash in their property chips unless there was a significant weakness in rental rates. Even relatively moderate long-term house price growth is attractive because rental income will more often than not cover individual property financial liabilities. This often leaves a paid up asset worth a lot more than the acquisition price!
Short-term property traders
There will always be an element of the property investment market with a preference for short-term “flips”. While the good times seem to be the easiest environment in which to crystallise short-term gains, there are also many opportunities when markets are in freefall (over sold situations). To a certain extent the activities of short-term traders have a greater impact on UK property prices simply because they are either in or out – they seem to come in waves.
So, if you consider the lack of suitable housing stock in the market it is easy to see why short-term property traders may have a greater influence on short-term movements than you might otherwise have thought. Long-term investor such as private landlords would be unlikely to liquidate their assets even in “challenging economic conditions” so long as their rental income streams remained intact. There are many aspects to the UK property market, there are many factors to take into consideration but at the end of the day, it simply comes down to plain old supply and demand.