When looking at the UK property market it is easy to forget that property prices are still moving higher. True, the rate of growth may have slowed but with the exception of London, the UK property market is still moving forward. What happens in 2019 is anybody’s guess at this moment in time but nobody is really predicting a property crash. So, why is the UK property market still relatively strong?
To get to the bottom of the UK property market you need to ignore the often biased press comment and dig deep, very deep. Concerns that the UK economy will struggle because of fewer economic migrants entering the workplace is a valid point. The suggestion immigration will simply fall off the edge of a cliff after Brexit is “project fear” at its very worst. Those who really want to make the effort to come to the UK will still do so, whether from the European Union, Australia or anywhere else in the world, they will simply abide by a different immigration system. Therefore, there will be ongoing demand for property.
It is fair to say that first-time buyers are still struggling to climb aboard the UK property ladder but it is also fair to say that cheap finance is still available. Even the US authorities, who recently looked to increase US base rates, have been forced to do an about turn. The Bank of England has also commented on UK base rates, suggesting they are unlikely to return to “historic levels” any time in the immediate future. Therefore, cheap finance will still be available to the mortgage market for some time to come. This will support new entrants and those looking to move further up the property ladder.
Relatively strong economy
It is worth reminding ourselves that despite the doom and gloom surrounding the UK economy and Brexit, the UK economy is still growing. Brexit concerns will rein in economic growth to around 1.6% in 2019 rising to 1.7% in 2020 and 1.8% a year in the five-year period to 2025. These are figures produced by PricewaterhouseCoopers and compare favourably to the likes of France, Germany, Italy and Spain. There is certainly a bias towards remaining in the European Union which is evident across the UK press, often failing to point out the fact that both the UK economy and UK property market are still in positive territory.
Lack of private rental accommodation
It is common knowledge that the UK has a lack of private rental accommodation as first-time buyers struggle to climb onto the ladder. This together with a lack of council/social housing has seen many individuals, couples and families forced to turn to the private rental market. Even during the midst of Brexit concerns, we have seen significant growth in buy to let investment in areas such as Birmingham and Leeds which have been supported by huge council inner-city regeneration funding. This is a trend likely to continue for some time to come although cheap finance is helping some first-time buyers climb onto the ladder.
Lack of new build homes
The ongoing lack of new builds across the UK has been a major problem for the last 20 or 30 years. We know the country is currently in excess of 100,000 new build properties behind the curve and while the current government and previous governments have “talked the talk” few have managed to “walk the walk”. Even if the floodgates were to open tomorrow and significant funding was made available, it would take many years to catch up on market demand. Housebuilding companies are simply not geared up to build new properties in the required numbers and many are talking of a skills shortage and lack of apprenticeship funding.