A quick review of the property news and trends that have been of interest in our property market roundup.
For all the talk of a depressed property market (we’ll come to this later), key changes in UK property investment are being overlooked, this is foolhardy as levels of investment are a key indicator of the health of the wider market and signal a positive shift.
A recent report by CBRE notes that property prices are “rebounding strongly from the uncertainty in the immediate aftermath of the EU referendum, the UK property investment market has seen a surprise surge in transaction volumes, particularly from overseas investors. Investment volumes are likely to remain robust at around £60bn for 2018 as a whole.”
In related news rents are due to rise by 15% over the next 5 years, depressed property prices should increase yields across the country. Some of this change may be as a direct result of recent buy to let legislation changes, with many landlords looking to cash in and leave the market.
Depressed Property Market?
One of the most fundamental concepts of economics and the backbone of a market economy is supply and demand. No one can argue that the demand for homes within the UK is not high. Fixing the housing crisis has been at the front of every governments to do list for 20 years, yet the problem has only worsened. James Prestwich, head of policy at the National Housing Federation, said around 340,000 homes should be built in England every year, yet in 2016-17, only 217,000 new homes were built, this figure included conversions of existing buildings, as well as new homes and still falls below target.
Problems with the demand relationship (the relationship between price and property) lies at the crux of the housing crisis. For too long overpricing or overvaluing by estate agents has been commonplace, used to secure instructions. Overvaluing a property appeals to vendors, sometimes over-optimistic in their expectations, and creates a misleading state of the market.
These market changes are, however, regional, in areas like Manchester and the north west, prices are rising and leaving London behind. As highlighted by our last news roundup property prices have only dropped by 0.33% across the UK this year and most of the depression has been seen at the top end of the market in London, in places where we quite frankly could only dream of affording. This is confirmed by the latest ONS house pricing figures for June.
The increase in interest rates will hopefully speed up the correction in prices and the “fog” of property transactions will pass. Meanwhile, property fund managers who apply realistic valuations to their development proposals and build what is in “demand” will continue to yield good returns for investors.