Will a lack of supply ultimately support the UK property market?

Despite the doom and gloom apparently surrounding the UK property market, prices have fallen nowhere near as far as many people had expected. While this has not stopped the constant barrage of negative headlines there is a growing opinion that a lack of supply will ultimately support the UK property market for the foreseeable future. Is this right? Will a lack of supply be enough to support markets in these uncertain times?

Massive lack of supply

It is interesting that a number of articles of late have highlighted the lack of properties being made available for resale. In areas such as Wales this has helped to support, and indeed push prices higher, before we even begin to look at the lack of newbuilds. As we have mentioned time and time again, the UK property market has been starved of newbuilds for decades now. Governments appear more than happy to artificially support property prices to keep voters on side and this is unlikely to change.

It is debatable as to whether the government foreseen the recent reduction in natural supply for the property market as potential sellers wait on the sidelines until markets are less volatile.

UK property market and pent up demand

While property prices in many parts of the UK have fallen slightly in light of the Brexit vote there does seem to be an underlying backbone of buyers on any sign of weakness. Indeed we only need to look at the currency issue to see why the UK is so popular with overseas investors. Even though we have seen a slight recovery in sterling exchange rates we are still talking about recent falls in the 20% region.

There are serious concerns that this growing pent up demand for UK property, together with a lack of supply, will lead to scarcity of properties and more competition between buyers. This could potentially place the UK economy in a difficult situation, with the property market relatively strong while the economy may need some assistance from the authorities. In a perfect world the Bank of England would increase base rates if property prices “got out of hand” but this would kill any potential economic recovery. This is leading to a very difficult quandary!

Promises from the politicians

Only this week we saw the Labour Party suggesting that if it was voted into power at the next general election it would wipe out homelessness across the UK. Apparently this would be tackled by increasing the number of properties made available to homeless people, something easier said than done?

Those who follow UK politics will be well aware that opposition parties find it very easy to talk about revolutionary ideas to tackle the UK property market while out of power. Once they gain power, as we have seen to a certain degree from the Conservative Party, many of the promises made about UK property newbuild numbers seem to disappear into the long grass. It is not difficult, it is not rocket science – quite simply the UK needs more newbuilds which would stimulate growth in the employment market and help to support the UK economy. Why are politicians reluctant to follow this relatively simple path?

Leave a Reply

XHTML: You can use these tags: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>