The UK Council of Mortgage Lenders has released a very interesting summary of where it sees the short to medium term future of the UK property market. At a time when UK property is beginning to look a little stretched there would appear to be a number of underlined factors which will support the sector going forward. So, what can we expect in 2016?
Economic situation
The UK economy has performed admirably in recent times against the worldwide backdrop and this is expected to continue during 2016 and beyond. The Council of Mortgage Lenders believes that this strong economic backbone will underpin an ongoing gentle improvement in UK housing and mortgage activity. In line with many experts, it is also believed that the main challenges to the UK economy lie overseas on a global and political basis. This is something which the UK economy and the UK government have had to live with for some time now with little change in this situation expected in the short term.
Support for gross mortgage lending
While housing sales across the UK are expected to struggle to maintain any momentum during 2016/17 there is still enough activity to support gross mortgage lending. This will be a mixture of purchase activity and a growing interest in remortgaging properties ahead of the expected rise in UK base rates which should occur in 2016. It will be interesting to see homeowners jockeying for position as the interest rate situation changes especially in light of the US increase yesterday.
New build initiatives slow to kick in
As we have mentioned on numerous occasions, many UK governments have promised the earth in relation to new build numbers but very few have managed to deliver. However, the Council of Mortgage Lenders expects the UK government to deliver in some shape or form although the impact on the overall market will be relatively slow through 2016/17. While this is disappointing, bearing in mind the many promises made prior to the general election, it is progress compared to historic activity.
There is no doubt that new build issues are supporting many areas of the UK property market, squeezing house prices higher and higher due to limited supply. Do politicians really have the appetite to significantly increase new build numbers which could dampen any future property price increases?
Buy to let market
Recent changes in the UK buy to let market, where various taxes have been introduced, could see a significant reduction in short to medium term investment. It seems bizarre that the authorities are attacking the buy to let market, in light of property shortages in many areas of the country, and buy to let purchase activity is expected to fall back towards 2014 levels over the next two years. Will this exacerbate the growing shortage of rental property across the UK? Will this attack on the buy to let market be something that the politicians will eventually regret?
For some time now the UK property market has been seen as a cash cow by politicians, often attacking the “rich” to plug any financial black holes in the government budget. Have they gone a step too far with the ongoing attack on UK buy to let property?