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2016 property market predictions

By Guest Blogger on in Industry News

2016 property market predictions

By Dorian Gonsalves, Director of Belvoir Lettings PLC

In 2015, the Government took a number of steps. Some came as a complete surprise and most of these steps were aimed towards making buy-to-let less attractive, at the same time as attempting to cool the over-heated housing market in London and the South East.

Their initiatives will cause a shortage of rented properties, which is a dangerous policy with around ten million people currently renting in the UK. Other schemes such as Help to Buy are fuelling demand for properties to buy, but it’s is likely to lead to house price inflation.

Personally speaking, the Government in 2016 should drastically increase the amount of social housing available for rent, as this is very much the ‘forgotten sector’ of the housing market. There are over 1.5m people on council waiting lists and many more are in a position where they can no longer afford to rent privately. This, in turn, should alleviate the growing pressure on rented housing stock and provide security for thousands of tenants.

We can’t hide the fact that there is a housing shortage. If landlords are having second thoughts about buying property due to tax and stamp duty changes, then the number of rental properties on the market will fail to meet a growing demand. It’s somewhat bizarre and unnecessary for the Government to choke off the supply of new rented properties at such a critical time.

In 2015, there was a new drive toward making properties available for home ownership, leaving many renters high and dry. I forecast a modest rise of 3 per cent on rents outside London, with rents steadily increasing as the supply of new rented properties fall.

In my opinion, 2016 is set to be an economically similar year to 2015. Predictions have shown inflation remaining below 2 per cent until at least 2017, and total earnings achieving a growth of 4 per cent in the next 12 months. What’s concerning is that thousands of tenants who are not in a position to buy a property will fall by the wayside, and become a forgotten part of the housing market. While schemes such as Help to Buy are a fantastic opportunity for people who wish to buy, there’s nothing currently in place to assist those who don’t.

It’s likely house prices will rise by at least 5 per cent in 2016, especially given that the Government is currently whipping the public into a home-buying frenzy, causing some analysts to predict a staggering rise of 50 per cent in house prices over the next ten years.

As an investment landlord and like the majority of landlords, I’ve been doing some number crunching to test the continuing positive returns of buy-to-let. When you factor in capital gain, inflation, rent inflation and on-going profits, unless a landlord is highly geared, I’m still convinced that buy-to-let is profitable in the majority of area’s Belvoir operates in. I’m also holding my breath in case the Government announces more ‘vote winning strategies’, by sacrificing a long-term and common sense approach to the housing market, as they failed to do in 2015.