While there is no doubt that 2017 will be a “tricky” year for the UK property market all is not lost. Despite the doom and gloom surrounding the U.K.’s forthcoming exit from the European Union there are signs that a slowdown in London property may be assisting regional markets. So, what does 2017 hold for the UK property market?
UK property market price performance to date
The latest data from the Land Registry confirms a general slowdown in the UK property market but nowhere near the doom and gloom figures pushed by the press. The annual rate of growth in UK property house prices fell from 7.7% in January 2016 to 6.9% in October. As you might expect, the slowdown in London property prices was more marked falling from 13.5% in January 2016 to 7.7% in October.
Some of the U.K.’s more prominent estate agents have released their forecasts for 2017 which range from zero to minimal growth in 2017. It is fair to say at this moment in time there are too many unknown variables to create a firm forecast but things will become clearer over the next 24 months.
London fall helping regional markets
Over the years many people have forecast that property investors would at some point leave the London market looking for greater value in regional property markets. Historically this trend never really emerged but there are signs that some investors are looking away from London. The accelerated reduction in London property price growth, compared to the rest of the UK, may just be a short-term phenomenon but it could also be the start of a changing trend.
There seems to more focus on the south-east and east of England where property prices have performed better than London over the last few months. The south-east of England has long been seen as an integral part of the UK economy which has attracted employment opportunities and growing demand for property. The annual rate of increase in London property prices fell to 7.7% in October while the south-east reported gains of 9.1% and the east of England 12.3%. While it is too soon to call the emergence of a new long term trend, this situation is certainly worth watching.
Unlocking property potential
On paper it does look as though London has most to lose if the UK Brexit negotiations do not go as planned. This may be one of the main reasons why investors are looking to regional markets where capital gains may be limited but there are significant rental yields available. In times of economic turmoil, confusion and uncertainty what better way to safeguard your investment funds than locking in potential double-digit rental yields?
The reality is that markets such as those in the east of England have been starved of investment for many years and a relatively small increase in demand could expose limited supply, pushing prices higher. We could also see a similar pattern in other parts of the UK which have historically been overshadowed by the ever popular and ever buoyant London property market.
Even though there are many uncertainties as we head into 2017 the UK property market has historically held up fairly well in times of trouble. The constant lack of supply has often limited property price downside in the short term although the ongoing issue of Brexit is a concern for many. On paper the European Union needs the UK as a trading partner as much as the UK relies to a certain extent upon the European Union. Negotiations for the U.K.’s exit will be difficult, challenging and in the short term investment markets could be led by rumours and counter rumours prior to the actual triggering of article 50 and the start of negotiations.