Will 2018 be a better year for the UK property market or will it be worse? Tenants and first time buyers face uncertainty again so we have taken a look at the factors that we believe will influence the property market in 2018.
We predict that interest rates will remain low. There is talk of a rise of 0.25% in the spring of 2018 and if this happens then the base rate from the Bank of England will be up to 0.75%. If you were to obtain a £175,000 tracker mortgage this will only add £22.
Over 50% of mortgage borrowers are on fixed rates which means that many will not notice this small rise. The economy is still weak and it is not predicted that there will be any further interest rate rises for the rest of the year. Although mortgages will remain to be pretty cheap, it is likely that inflation will outstrip any wage increases and make this feel like a real burden.
Increase in the Building of New Houses
In 2016 – 17 there were an estimated 217,000 new houses that came onto the property market. This is an increase of 20% on the previous year. This is not all good news though as it means that the new home availability numbers are now at the same level as they were before the financial crisis.
The government’s target of 300,000 new homes is still way off and coupled with the Brexit migration levels continuing to decline and the increase of activity in construction it could well be that the supply of available homes will be under less pressure than it has been for a few years now.
First Time Buyers will cause Problems for Landlords
We predict that first time buyers will be back in the game in 2018 and this will see a drop in new tenants looking to rent. Back in 2015 there were 120,000 houses purchased by landlords. But this is expected to fall to less than 80,000 next year according to the Council of Mortgage Lenders.
Landlords have to contend with a rise in taxes as well as much stricter lending requirements these days. This will result in a slight swing towards people looking to buy a single home as opposed to the buy to let market.
First Time Buyers Stamp Duty Cut
In the budget, Philip Hammond cut stamp duty for homes valued at up to £300,000 for first time buyers. This is going to provide a large number of first time buyers with a saving of around £5,000.
The downside to this is that house prices will rise by around 0.3% according to the Office for Budget Responsibility and they are predicting that these increases will occur in 2018. In some cases this means that first time buyers will save nothing.
The “help to buy” scheme has been boosted by a further £10 billion. This will enable financing to be provided until the year 2021. There are critics of the scheme that say this financing has been wasted in the price for new home builds.
Tenants will be better off
The pressure will be on landlords and they will find it very difficult to squeeze any more money out of tenants. In 2017 the average UK rents increased by less than 1% and in the capital they fell.
Wages are not keeping up with inflation so it is very unlikely that rents will rise in 2018. There is more good news for tenants in the shape of the ban on letting agency fees. Although it hasn’t been implemented yet the government is determined to introduce this in 2018.