Howard Kennedy Economic Breakfast Briefing - 24 January 2018
As world and industry leaders gathered in Davos, the great and the good from the real estate industry joined Howard Kennedy at No. 1 London Bridge to gain insight into what we can expect from the residential property market in 2018.
Chair: Jason Lewis, Partner, Real Estate, Howard Kennedy
Scott Cabot, Associate Director, Residential Research, CBRE
John Wyn Evans, Head of Investment Strategy, Investec
David Galman, Director, Galliard
The 70 plus delegates agreed that the residential market continues to face challenges. Key conclusions were:
The UK housing market in 2017 flattened out across the UK, particularly in the latter half of the year. Household income remains under pressure, yet affordability, thanks to stable interest rates, continues to look good.
The Midlands and the North of England (particularly the North West) buoyed by vibrant markets in Manchester and Liverpool, out-performed the rest of the UK in terms of sales and increases in house prices.
London, however, presents a very different picture. Brexit and increases to stamp duty have had a negative impact on the London market. The London housing market is more sensitive to world events, with the prime London market under particular stress.
Interest rates have a direct impact on housing market affordability. Although predicting the timing of future interest rate rises is as difficult as picking an Aintree winner, speakers at the Howard Kennedy Economic Breakfast Briefing expect to see small rises towards the end of 2018 or early 2019.
The global economy is encouraging; looking beyond UK shores, economic growth is predicted in both emerging and developed economies, which will provide a cushion to Brexit and pull the UK economy with it throughout the year and beyond.
The buy-to-let activity, following the introduction of a more punitive tax regime has dropped by a considerable 30%. It is unlikely that activity will return back to levels seen in previous years.
So what would housebuilders like to see in 2018 and beyond? Our delegates concluded:
Help to Buy continues to underpin the residential market outside of the M25, yet its six month qualification period holds back new development. Developers, who need to secure funding to build out and work on two year cycle, are creating innovative option agreements with purchasers to help take advantage of Help to Buy. Help to Buy’s future is critical to the housing market and delegates at the Howard Kennedy Economic Breakfast Briefing urge the Government to continue to support it.
The planning process continues to frustrate and is increasingly difficult to navigate. Developers now typically need the support of specialist lawyers and planning consultants to secure permissions from local authorities, who are often resistant to new development. It is at odds with the Government’s aspirations and desperately needs fundamental reform.