The analysis and conjecture about what it will mean for every single sector in the UK economy has begun in earnest ever since Trump vanquished Hillary Clinton and became President Elect. Add in the huge uncertainty around Brexit and, it would be fair to say, that we’re all desperately hoping that both of these factors combined do not mean the end of Western civilisation as we know it.
I’m being flippant of course but such is the enormity of Trump’s election, coupled with the ways and means by which the UK extricates itself from the EU, that it doesn’t seem too far-fetched to determine 2016 as a game-changing year. Indeed, as we’ve gone through the last 12 months there has been a somewhat unnerving sense that things are turning on their head and the old norms that we may once have been comfortable with are being not just eroded but blown apart.
So, how does this translate to our own sector and what might its trajectory be throughout 2017? Well, if you are a realist then you’re likely to suggest that the UK property market is unlikely to take significant flight in the foreseeable future. The norm of the market has been subdued in recent months and I see nothing in the tea leaves to suggest this might be radically changing anytime soon. If anything, there are a significant number of challenges to be faced which could make the situation even more fraught.
I’m thinking of course of the invocation of Article 50 to leave the EU, but there is also a sense that we are unlikely to see, for example, Bank Base Rate stability during the next 12 months. There is an argument that the MPC didn’t really need to cut BBR back in August but it was fearful of a huge economic fall off the cliff precipitated by the vote to leave the EU. Once, however, we get into 2017 and we perhaps start to see inflation pushing up to, and beyond, the Committee’s own 2% target then the pressure to raise rates will be great.
While the Bank of England Governor did suggest he might be willing to let inflation run above target for some time before increasing rates, if I was a betting man, then I could certainly see BBR going back up to 0.5% early in the year, followed by one (perhaps even two) further increases throughout the rest of 2017. We are not talking huge jumps – probably just 0.25% each time – but would it really be a shock to see base rate back up to 1% by the end of the year?
What may hold the Committee back is the fact that it won’t want to put the frighteners on the public too much, especially if we are entering a period of slowing growth, perhaps even a recession as some have touted. Carney will certainly not wish to start on this path to ‘normalisation’ too soon if it’s going to have a damaging impact on the UK’s growth prospects. One suspects that political figures as well will not want to see such a policy especially when they’ll be trying to prove to the public that they can deliver a relatively positive Brexit outcome.
In terms of President Trump, the influence on Britain itself might be significant if he’s willing to offer attractive trade deals, however his influence on the property market might be less so. London agents might well anticipate a further injection of US-based money in order to take advantage of its ‘safe haven’ image however round the rest of the country that influence will be microscopic.
What is likely to influence the UK’s property market much more is the outcome of this month’s Autumn Statement. We have started to hear little snippets of what it will contain but one suspects any change to the current stamp duty regime, whether that be further in favour of first-time buyers, or to perhaps row back on the second homes extra charges, will obviously go down well. Particularly the latter – many in my own sector, conveyancing, are crying out for an end to the extra charges arguing that they have had a crippling impact on purchasing, especially by buy-to-let landlords. While that buy-to-let purchase market does seem to have picked up in the last couple of months, there would clearly be a boost if Philip Hammond ditched George Osborne’s measures. My own view is that this is highly unlikely but you never know.
Overall, the big international events of 2016 will of course have their impact but it seems that some, of what you might call, the minutiae of the UK property market are going to have far greater influence on our sector. What we can be certain of is that many potential purchasers and movers are going to need to feel far more confident about their future situation, and the world they live in, before they are willing to take action. In that sense the big problem of our market – namely lack of supply – doesn’t seem to be going out of fashion anytime soon and therefore you should probably get used to the current market, because it’s likely to be with us for some time to come.
