It is probably true to say that 2019 will not be a year to be forgotten in a hurry. The effect of the political and economic uncertainty was felt by many sectors but none more so than the property sector. Market demand and supply were muted, although overseas investors took advantage of the falling GBP to keep some markets buoyant. So, what can we expect to see in 2020? The truth of the matter is that no one (really, no one!) actually knows, but there have been many theories, postulations, predictions and outright guesses proffered to the weary portion of the British population who are buying, selling, letting, investing and working in the property market.
So, how is 2020 going to look? The following is what we see as likely based on the predictions of a wide range of property professionals.
Already this year there have been reports of banks competing to outdo each other with offerings of cheaper home loans, smaller deposits, lower rates, longer terms and relaxed affordability rules. It’s likely that 2020 will see lenders making attractive product offerings to targeted groups such as first-time buyers and profession-based groups e.g. doctors, lawyers, the self-employed. Buy-to-Let mortgages are also likely to become more competitive, driving rates down as more lenders open their doors to the ‘limited company landlord’.
It is also likely that mortgage costs will come down but this window could begin to close during 2020. This may work to accelerate buyers’ return to the market. Rates on a 10-year fixed-term mortgage are still quite high and unattractive, particularly for the buoyant first-time buyers’ market, so there could be some rate cuts there. Attractive mortgage rates are not always conducive to a fluid market as many homeowners look to take advantage by staying put, remortgaging and doing renovations.
Surely, there must be some respite on the horizon for the embattled landlords of this country. On a positive note, government neglect of the property market has left a hole in supply which will continue to translate into a high demand for good quality, affordable rental properties. For tenants, the outlook is not so bright as “affordable” is blasted by supply deficits and rents continue to rise, perhaps at an even faster rate than in 2019. RICS have suggested that might be around 2.5% (3% in London).
Of course, it is not all sunshine and smiles for landlords either. The 2020/21 tax year is the first year without any form of Section 21 relief being available. Not only is there no longer any mortgage interest cost allowance but the abolition of tenant-paid letting fees, could very quickly erode any illusory profit from increased rents.
2019 saw many landlords sell up and move on. For those landlords sticking around or entering the market, there are lots of lenders offering better terms on buy-to-let mortgages.
It wasn’t all doom and gloom for overseas buyers in 2019 as many took advantage of a weak pound. Unfortunately, the outlook may not be so rosy during 2020.
The outcome of the General Election brought some political and economic certainty, which in turn saw sterling recover some of its lost ground. A weak pound was the impetus for many overseas buyers to make their first forays into the UK property market and for others to expand their portfolios. A stronger pound may stifle future growth on this basis.
On the other hand, the new Government has announced plans to introduce an additional 3% stamp duty charge on non-resident buyers as part of its February budget. This may create a rush of overseas buyers, at least in the short term, looking to secure a deal before the increased levy is imposed.
Political and economic certainty is always more attractive than a weak currency. That’s what makes the UK an attractive investment proposition in the first place. So, whilst the window to take advantage of weak sterling is closing, the existence of certainty in the UK, that was so dramatically absent in 2019, and political and economic uncertainty in other parts of the world, should maintain a steady flow of overseas investors into the UK.
A better vision of how the future will look is likely to lead to more confidence in the property market. Buyers and sellers have been holding back waiting for some form of future to emerge. Now this has materialised, it is expected that the property market will be revitalised and prospects improved.
According to Rightmove, the average house price should rise by 2% during 2020. There will, of course, be regional variations, with the North continuing to lead the way. However, it may be a slow start as low stock levels and affordability issues continue cast a shadow over the market. Two percent seems to be the generally agreed upon figure, although some are predicting 3%. Most also agree that rises will occur during the first half of the year and then stall as economic uncertainty re-emerges and remains in place until an EU trade deal is agreed.
Despite popular belief (fuelled by the media), there was a market in 2019 and there will be one in 2020. A stronger market is expected this year but there will not be a sudden glut of properties hitting the market – bad news for buyers, better news for sellers. Whilst many sellers undeniably held back during 2019, those trading up may be the first to market hoping to get a deal before prices start rising. Buyers will have more confidence and return to the market; this may not translate into a massive rise in house prices but will be reflected in an increase in transaction volume. Again, this will be tempered if seller expectations are not managed and asking prices are set unrealistically high.
The general consensus appears to be that there isn’t one. Some pundits are predicting an active Q1, whilst as many others predict a slow start to 2020. It is quite possible that there will be a surge in activity in January, which may even become a frenzy. Or, perhaps, the market will sputter to life only to flounder again by mid-year. Such a fizzle will be fuelled by the realisation that divorcing the EU was only the start of the pain; the trade deals required for satisfactory settlement is a quite different beast and one that will undoubtedly have a direct impact on the property market. For the time being, and probably during the first half of the year, the sun is shining and it is the time to make hay. After that, buckle up and prepare for what could be a much more turbulent second half of the year.
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Domus Holmes Property Finder (www.domusholmes.co.uk) is a Bristol-based independent property buying agent dedicated to sourcing, negotiating and securing residential and commercial properties for a diverse range of clients.