Clichéd though it sounds, a new year usually brings with it the sense of a fresh start. In 2020, this feeling has been heightened.
Why? Because the recent election outcome, coupled with the overriding consensus that the fast-approaching Brexit deadline will actually be met (at the fourth time of asking), promises to alleviate the uncertainty that has infringed on the decision-making of businesses, consumers and investors alike.
In that regard, the start of this year differs notably from 12 months ago – there is now the belief that there will be significant change and progress when it comes to addressing domestic issues, including potential reforms in the property sector.
Here I take a look at some of the most pertinent and interesting trends to watch out for in the property sector in 2020.
Brexit and Budget to shape the first half of the year
One of the safest predictions we can make is to say that the first half of 2020 will be shaped by two Bs: Brexit and the Budget.
The Brexit deadline stands at 31st January. Meanwhile, the Government has announced that the Budget will take place on 11th March. It is impossible to looks past these two events when making any predictions about what the coming 12 months will have in store.
Looking first at Brexit, the prevailing sentiment among property experts is that once the deadline has passed, there will be an upturn in market activity; uncertainty has spawned hesitancy among the people building, buying and selling property, so as greater clarity is obtained around the UK’s split from the EU then fresh life could be breathed into the market.
In Q3 2019 Experience Invest surveyed more than 1,000 UK property investors, finding that just over half (51%) of the respondents were confident there will be an increase in property listings and sales once Brexit is complete. The majority (55%) also admitted they had paused on their investment plans over the course of 2019 as they awaited the outcome of Brexit.
Just six weeks after the Brexit deadline comes the 2020 Spring Budget. The annual fiscal announcement – which was cancelled last year due to the election – is always a noteworthy event, but this one takes on added important. It is the first of a new parliament, the first under a new Prime Minister and Chancellor, and the first after the Brexit deadline.
What can we expect? Well, stamp duty reforms, first-time buyer relief and spending commitments for both new-builds and local infrastructure all seem likely. Any such reforms will trigger a reaction in the property sector, so it is vital that businesses and investors pay attention to what the Chancellor says in mid-March.
Property prices to grow, but probably not in London
The UK is renowned for its love of property ownership. It is perhaps unsurprising, therefore, that there is a keen media interest in the price of residential real estate. And over recent years there has been an element of scaremongering as prices stopped rising at the rapid pace recorded over previous decades.
Nevertheless, over the past ten years the average UK house price has risen from £167,469 to £232,944. This impressive growth has come in a period that included the aftermath of the global financial crisis, four general elections, three new prime ministers and the Brexit saga.
It is a trend that experts expect to continue in 2020. In fact, Reuters conducted a poll of 27 property market analysts, finding that on average they expect the UK house price to increase by 1.5% in 2020 and 2.3% in 2021.
But the figures do not tell the full story. Indeed, the statistics we often read in the media about house prices are often somewhat muddled by the fact we look at the entire country, rather than the performance of different regions, which can vary significantly.
Last year Zoopla released some data that put an interesting twist on how we view house prices. Looking at the first six months of 2019, it found that on average a property in London fell in value by £71.23 each day. Conversely, houses in the West Midlands (+£36.58), South East (+£35.32), North West (+£20.39), Wales (+£18.03), Yorkshire (+£12.37) and North East (+£6.97) all rose in value.
It underlines the importance of taking a more regional focus when assessing property price trends. And in 2020, it looks as though many regions outside of London will outperform the capital in term of house price growth.
Housebuilding to remain a key focus
The shortage of available housing across the UK is impacting most areas of society. As a result, the so-called Housing Crisis is an ever-present topic in the media.
This will remain the case in 2020, not least because it will almost certainly inform a major part of the Conservative government’s domestic policy. Indeed, successive governments have made bold claims regarding the number of new-builds they will have erected – these targets have, without fail, been missed.
The Tory Party remains wedded to its promise of ensuring 300,000 new houses are added to the property market each year by the time we reach the mid-2020s. And by the end of the current parliament (2025), Johnson et al have promised to build a million new homes.
Only time will tell if the Government can reach this target. Evidence from the past two decades does not paint a particularly pretty picture; housebuilding has typically fallen well short of the levels proposed.
Again, this makes the aforementioned Budget in March hugely important; will Chancellor Sajid Javid unveil any major reforms or spending commitments that could fuel activity in the new-build space?
At Experience Invest we work closely with property developers and local councils to ensure private investment is made available for much-needed real estate projects. It will be interesting to see if the government can do more during the current five-year parliament to ensure there is more collaboration between the public and private sector when it comes to building more new homes across the UK.