With Britain’s impending exit from the European Union, many investors both home and abroad have apprehensions about investing in property in the UK. However, there has been success stories with many domestic and foreign investors which looks set to continue in many parts of the UK.
In this article, we will make a few predictions on what we expect to happen with the UK property markets in 2019.
No clarity on London markets until Brexit is sorted
If the deal Britain gets is a bad one as far as our exit from the European Union is concerned, then it’s likely matters in the London markets will continue to be stagnant and therefore not change all that much. It’s been no secret that prices in the capital have remained dormant for the last year or two as a result of the Brexit referendum.
London has long been the best place to invest in order to achieve capital growth- it hasn’t had a strong yield for several years, so with the main selling point for London property not there are the moment, many investors have turned to other major UK cities in order to achieve their investment goals. This trend we feel is likely to continue in 2019, but it’s also possible the London markets could rebound if political matters surrounding Brexit improve.
Regional markets will prove the most resilient
With so much uncertainty in the capital, it’s expected that regional property markets in other areas of the UK will be bolstered and continue to prove, which has been the case since 2016.
In a recent article based on Hometrack’s UK Cities House Price Index, Zoopla named the best cities to buy property. They included Leicester, Manchester, Birmingham and Edinburgh in the top 4, with Liverpool, Sheffield and Leeds making it into the top 10.
We expect market conditions in 2019 to favour more regional areas of the UK as London will likely feel the brunt of any political ramifications instead.
Rise in interest rates
Governer of the Bank of England Mark Carney has indicated that interest rates will continue to rise but slowly over time. With that in mind, it’s highly likely that the current base rate of 0.75%, which increased from 0.5% earlier this year, is set to rise at a similar pace throughout 2019.
We think 1% is a minimum expectation for interest rates to rise to, and this could possibly increase later on in the year depending on how Brexit pans out. This will naturally increase the cost of many mortgages to households, which may deter some investors from residential property, but not nearly enough in our opinion to have a majorly negative effect.
Supply and demand gap to increase even further
This is perhaps one of the easiest predictions to make regarding property markets in 2019; the reason being that the gap between properties being built and the actual demand for them has been growing year on year for several decades.
With all of the political talk surrounding Brexit, there are no real measures or serious indication from the government that will adequately increase supply to meet the ever-growing demand.
With this in mind, we can only see house prices as a whole rising across the UK (we accept the national average may be slow to increase but this is largely as a result of the stagnant London markets massively affecting the average.)
Slow start to 2019, but things to pick up as the year goes on
With the vote on the Brexit deal in parliament in January and the UK’s expected exit from the European Union by April/March, it’s entirely likely the markets will be uncertain for the first half of 2019, but many experts are predicting the property markets to pick up once the political situation is clearer later on in the year.
Next year, JLL says they expect an initial slump at the beginning of next year, showing 1 per cent growth in the first six months, then picking up in the second half to make 1.5 per cent growth by the end of the year. This should grow to 11 per cent in the next five years.
Adam Challis, head of UK Residential Research, says “With UK earnings growth set to return to a more normal rate of 4 per cent per annum by 2021, real wage growth and more modest property price increases will unlock transactions that have been hampered by a lack of affordability.”
So, these are just a few of the things to expect regarding the UK property markets in 2019. Obviously, much of this is subject to Brexit but we feel that many of these predictions will happen and shape the UK markets to increase in capital growth for the most part.
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