Will property thrive or dive in the next five years?

publication date: May 28, 2015
 | 
author/source: Kate Faulkner, Property Expert and Author of Which? Property Books

Will property thrive or dive in the next five years?

I heard a real ‘sigh of relief’ from the property industry when the election results were announced.

They were genuinely scared that Labour would win and their policies would end up crashing the £2mn plus property market; cause buy to let landlords across the country to sell up; institutional investment landlords to pull out of their plans to expand in the UK and not actually build anywhere near enough properties either.

So whatever your politics a Conservative victory is good for the property market, mainly because it means we have a good idea of what they are going to do based on the last five years.

For the property market to thrive on-going we need economic stability. This government does get that property prices rising at 30% a year and crashing at the same rate isn’t good for us and that it’s devastating for our economy.

From a property perspective, low interest rates are good news and are expected to continue for the next year or two at the current 0.5% rate, and may never go back to the 5-6% levels we saw from 2000 to 2007 and are highly unlikely to go back to the double digit rates we saw in the 1980s.

Inflation also has an impact on ‘real’ property values. For example if you bought a property for £150,000 cash and inflation grew at its long term average of 3% per year, the property would need to grow in value by this rate plus the costs of buying and selling just for its real value to ‘stand still’. And with over 50% of homeowners in the UK owning their property outright ie with cash, that’s possible in some areas over the coming years, while areas such as Northern Ireland, Liverpool, Manchester and Leeds where property is plentiful, then that’s actually unlikely – so investors certainly need to be cautious moving forward.

From a buy to let perspective, the idea of taking away ‘red tape’ is absolutely not being applied to this sector. In fact in the last bill that came before parliament, aptly called the ‘Deregulation Bill’, more red tape for the private rented sector (PRS) was actually bought in!

Up and coming legislation changes include:-

  • Immigration checks extended to England – introduction ‘anytime now’

  • New retaliatory eviction rules - expected September 2015

  • Carbon monoxide and smoke alarms – expected 1st October

  • Possibly landlord licensing – although missed off the Queen’s Speech

  • You may not be allowed to arbitrarily ban ‘subletting’

Finally there are things like what happens to supply and demand and tax. Overall, it’s first time buyers and renters who will benefit. This government is committed to providing ‘affordable homes’ for those that can buy with a bit of help. Their Help to Buy scheme has been a success – whatever the critics say. All of the criticism laid at the door of Help to Buy such as increasing prices, putting people into financial difficulties etc just hasn’t happened. It’s cheaper areas that have benefited from extra new build stock, areas like London to be honest, Help to Buy hasn’t really worked.

Secondly, the European model of bringing large institutional landlords to the UK (huge abroad) is being pursued by the government. This could impact detrimentally on landlords initially – especially those near the supply of affordable rental accommodation of 100 or more properties all be let at the same time. However, the demand for rental property is increasing, so overtime any issues are likely to be short term.

So whether you wanted the Conservatives or not running the country as far as private property interests are concerned, it’s likely to deliver a stable property market over the coming years.

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Which? Property books and one of the UK's top property experts.
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