We are expecting a period of sustained growth and stability in the UK housing market in 2016 as activity levels respond to supporting factors such as real wage growth and record low mortgage rates. Sound fundamentals are driving a confidence in the market not seen since 2007 and whilst Government initiatives aimed at boosting supply are all very evident, the push for homeownership may exacerbate a housing divide between those who can afford to buy a home through Help or Buy or Starter Homes and those who can’t.
Commenting on JLL’s national house price forecasts Neil Chegwidden, Residential Research Director at JLL says: "Whilst the overall market will move steadily forward, there will be regional variations that will see London and the South East as the strongest performing markets for price growth. In contrast Prime London will demonstrate the weakest price growth of any submarket as the effects of a rise in Stamp Duty continue to dominate."
The table below details our forecasts for house price growth and rental growth, together with activity and development in terms of housing transactions and completions from 2016 - 2020
Looking at the rental market, Chegwidden continues: "Demand for rental accommodation has accelerated quickly over the past decade and there is little to suggest this trend will run out of steam anytime soon. With supply constraints possible in the medium-term, we believe there will be additional upward pressures on rents over the next five years. Significantly, the number of rented households has escalated from just 2.3m, or 11% of all households, ten years ago to 4.4m, or 19.4% of all households today."
Current trends also suggest that the number and proportion of private renters are set to rise further in the medium-term, driven largely by housing unaffordability and onerous deposits. Government initiatives such as 20% discounted starter homes offer some hope for would-be young homebuyers, but this is unlikely to reverse, or even notably alter the strong upward march of the private rented sector, which is already the most active part of the domestic housing market.
The final word
2016 should provide a sounder base for British businesses, consumers, home owners, home buyers, renters and landlords following 2015, which was disrupted by the general election. We expect UK house price growth of 5% in 2016 with transaction volumes rising to 1.28m.
Looking further ahead, despite the EU referendum and the likelihood of further interest rate rises, 2017 should be another year of positive economic expansion and improved household finances and confidence. This backdrop should lead to greater UK housing market activity, reasonably strong house price growth and a continuation of development volume growth in 2017.
Overseas economies and unrest pose some risk but fundamentally the UK economy is in a stronger and more stable place than almost anywhere else in the world. Higher value London markets, which are being rocked by punitive levels of stamp duty, face an uneasy and vulnerable short-term outlook, but most regional mainstream housing markets are looking in good health. Positive economics and more secure household confidence and finances, alongside insufficient new housing delivery will place upward pressure on prices and will lead to more transactions.