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What is in store for 2017

Published on Tuesday, 20 December 2016

It’s that time of year when we take a look back over the trends and policies which have influenced the market in 2016 and take a peek at what may transpire in 2017.

 

Without a doubt, it will be a tough year for the buy-to-let sector. The Association of Residential Letting Agents (ARLA) expect to see a drop in the number of new rental properties coming onto the market in the UK next year with well over a third (37%) of its members predicting a reduction of supply following the increased stamp duty for buy-to-lets. Inevitably, this will be followed by an increase in rents with 52% predicting this outcome compounded by the changes to mortgage interest relief and the ban on letting agent fees.

 

However, members also forecast increased demand for rental properties in 2017. They expect some landlords to exit the market and stricter lending criteria for buy-to-let mortgages from lenders next year to deter new landlords from entering the sector.

 

This was certainly borne out by buy-to-let mortgage activity which was down 19% year-on-year and 6.1 per cent on October – the only major residential category to experience a drop, according to research from Connells Survey & Valuation.

 

ARLA has also warned of ‘unintended consequences’ of reforms to the licensing of ‘Houses in Multiple Occupation’ known as HMOs ARLA works . The proposals include removing the storey rule thereby extending mandatory licensing to flats above and below business premises, and set a minimum room size of 6.52sq-m.

 

It fears changes to minimum room sizes would reduce choice for tenants many of whom opt for smaller rooms to incur lower costs further reducing supply whilst parents living in bedsits or letting a room with a baby or young child may no longer be able to do so because it would constitute an offence under the proposed reforms.

 

In his round-up of predictions for next year ARLA’s managing director David Cox accused the government of lashing out against the private rented sector ‘to cover its own failure to build the number of homes this country needs’.

 

Predictions from property buying agency Stacks Property Search include property prices remaining relatively stable mainly due to an uncertain outlook. The stalemate at the top end of the market will ease as vendors in the £2 million+ bracket will have no option but to reduce prices if they want to achieve a sale. Homes on the edge of villages with a vibrant community and good commuting will be in demand. Renting will become more expensive particularly student lets in university towns and cities.

 

Overall, commercial property investment volumes will have dropped by around 30% by the end of this year compared to 2015 ending up at just under £50bn whilst the ‘waiting game’ trend among businesses has definitely taken hold as cautious bosses shy away from long-term contracts, according to commercial property and real estate services adviser CBRE.

The industrial sector is likely to do well next year and increased demand is expected from the ‘alternative’ or ‘specialist’ sectors whilst innovation and technology companies are likely to be the key drivers of performance in the commercial property sector in 2017. Refurbishment projects are likely to help stimulate the provision of workspace, according to CBRE predictions.


CBRE expects the housing market to plateau both in terms of price growth and transactions. Despite having accounted for between 30-40% of buyers, cash buyers virtually disappeared from the market in the second half of 2016 although CBRE think the weak pound will continue to attract foreign buyers despite stamp duty costs, a view shared by RICS surveyors.

 

Shared housing will continue as an upward trend, according to CBRE both in the rental sector and as parents continue to provide a roof over the heads of adult children. Shared households have grown significantly in London where houses with three or more adults have grown by 28% in London over the ten years to 2011, compared with growth of 17% in England and an overall household growth of 8% over that same period. Households with parents and their adult children have increased by 16% over the decade in London, compared with an increase of 11% in England as a whole.

 

The Q3 2016 RICS UK Commercial Property Market Survey revealed a slight recovery following the Brexit vote although remaining ‘subdued’ for the rest of the year. In the tenant sector demand returned following stagnation in Q2. Retail and office demand remained relatively stable and industrial was the only segment of the market where occupier demand increased despite a decline in supply.

 
Some 14% of RICS members reported having seen evidence of some companies looking to relocate away from the UK following the EU referendum with Northern Ireland, West Midlands and London seeing the most companies considering this option. A third of respondents also thought businesses would look to relocate part of their business following the Brexit vote. Nevertheless, most surveyors felt there would be modest rent increases.

 

Overall, most surveyors expect to see capital value growth in industrial and office markets whilst secondary retail has the weakest expectations. Projections in London look to follow a flat trend throughout 2017 as does Scotland, but all other areas across the UK expect to experience headline capital gains.



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