The past twelve months have certainly been an eventful year for the UK property market, and as anticipated, Brexit proved to be a dominating issue.
And while we are still no clearer on how the UK’s withdrawal from the EU will be managed, the housing market once again proved resilient, attracting interest from domestic and foreign investors alike.
While some industry commentators have been critical of real estate’s performance in 2018, there’s no denying that of all the traditional assets currently available to investors, property remains a leading asset class. Based on a survey conducted at the beginning of the year, Market Financial Solutions discovered that 53% of UK investors were directing their capital into traditional asset classes over the course of 2018, with 63% of regarding property as a safe and secure.
Moreover, the overwhelming number of investors were not deterred by the potential impact of Brexit on their investment strategy – 77% said the EU referendum had not changed the way they had invested. The positive investor sentiment projected by Market Financial Solutions at the beginning of the year was matched by the steady increase in house prices across the country, led by regions like the North West and the Midlands which saw impressive levels of growth in 2018. Supply and affordability challenges, however, remain pressing issues in need of urgent attention.
How did the Government do in 2018?
Following a strong start to the year, when the Government touted new housing initiative to address the growing imbalance between supply and demand, public attention quickly turned towards the logistics and realities of the UK’s nearing departure from the European Union in March 2019.
On top of the political turbulence caused by these Brexit negotiations, the appointment of Dominic Raab as the new Housing Minister in January – only to be followed by Kit Malthouse six months later – came as a blow to a property market. The Government was subsequently criticised by property commentators for its ‘merry-go-round’ of ministers, which has so far undermined the cohesion and clarity of the country’s housing policy.
There were, however, some positive steps in the right direction. In an attempt to meet the target of adding 300,00 new homes to the market every year, the Prime Minister in September pledged £2 billion in new funding towards the construction of affordable new-builds. This was followed by the Chancellor’s announcement of a funding boost for SME developers as part of the 2018 Autumn Budget.
While these measures were highly welcomed and will help increasing the amount of homes on the real estate market, there’s no denying that much more needs to be done in the next year to ensure people are able to jump on and move up the property ladder.
Addressing the housing crisis in 2019
Brexit will no doubt continue to dominate the headlines over the first months of the year and this is not likely to deter property investment in the short-term. Based on current trends, house prices are set to continue rising over the coming 12 months, with a recent industry report suggesting that UK property prices are set to grow by 2.5% in 2019. Coupled with strong investor sentiment and high demand for property, the 2019 is expected to be another year of opportunity for prospective homebuyers and property investors.
However, a strong focus will need to be placed on addressing the pressing housing shortage and ensuring that all groups have access to affordable property. In reality, this means that the ambitious goal of 300,000 new homes needs to be supplemented with new and innovative solutions to ensure that the supply of property can keep up with demand.
This includes encouraging investors to refurbish derelict properties – as it stands, there are more than 216,000 homes across the country which have stood empty for six months or more – and putting them back on the property market. Turning ex-retail spaces and commercial properties into housing is another way of making the most of the available housing stock, rather than the current approach of focusing almost exclusively on the construction of new-builds.
As the property market continues to face significant challenges, we should be exploring creative new approaches like this that take advantage of the existing housing stock. The construction of new homes is certainly vital if we are to keep up with the growing demand, however it would be a missed opportunity should we not also take advantage of the houses that already exist on the market. As we look to 2019, a holistic strategy is required should the imbalance between housing demand and supply be effectively corrected.