House prices and property predictions for 2016

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4 Jan 2016

House prices and property predictions for 2016

Author: Peter Coles

 

The property market is a key part of the UK’s economy, so it’s no wonder we’re all obsessed with house prices and where they’re heading. Home ownership is what many people strive for from a young age, and property investment is becoming more and more popular; so what will happen to the housing market in 2016?

Having been established for nearly 30 years, it’s fair to say that Romans’ property experts have experienced their share of property cycles. Here, they reveal their professional opinion and predictions for the year ahead for the local market.

Peter Coles 
Group Managing Director
Vincent Courtney
Managing Director,
Residential Sales
Peter Fuller FARLA
Managing Director,
Lettings

 

75% of the public predict house prices will rise in 2016

According to Romans’ recent poll 75% of people predict house prices will rise in 2016, slightly less than 12 months earlier when 89% predicted house prices will rise in 2015. The fact that prices will continue to rise is no secret. There is simply no good reason why they wouldn’t; demand from buyers is stronger than ever, there isn’t enough supply to satisfy the demand, and there are nowhere near enough new builds. But how much will they rise by?

“I believe house prices will rise by 5-10% in most of the towns we cover and the increases will predominantly be seen in the first half of the year” comments Peter Coles. “Higher increases will prevail in the towns which are attracting more competition between first time buyers and investors, including Basingstoke, Bracknell, Guildford, Maidenhead, Reading and West Drayton.”

Location

Increase/decrease of sold prices in the last year*

House price increase prediction

What will affect house prices in 2016?

Aldershot

+13%

+6%

Prices are low compared to surrounding towns and local regeneration is increasing demand

Wellesley, a new development will help stabilise the demand, but there is still a lack of stock in the short-term, pushing prices up

Basingstoke

+6%

+9%

New Waitrose and John Lewis store opened in 2015

New builds continue to attract competition between first time buyers and investors

New school in Limes Park opening in 2016 which could attract more families to the area

Beaconsfield

+9%

+5%

Good school catchments and private education choices for families

Continued popularity from families moving out of London, and lack of new builds has resulted in a supply and demand imbalance

Bracknell

+12%

+10%

Town centre regeneration is attracting more buyers and tenants and having a positive effect on prices as a result

Burnham

+5%

+7%

Crossrail is increasing demand from buyers and tenants in Burnham and creating a supply imbalance

Camberley

+5%

+5%

Continued town centre regeneration

Lack of new builds, especially family homes, is causing prices to rise

Caversham

+11%

+6%

With Crossrail around the corner this area will grow in popularity

Property hotspot for investors

Good school catchments and private education choices for families

Crowthorne

+6%

+5%

Lack of supply will continue to drive house prices up

Popular schools and the ‘village feel’ of Crowthorne continue to attract buyers

Farnborough

+12%

+7%

Town regeneration, including a Vue cinema, Sainsbury’s, and four new hotels, is attracting more buyers and tenants

Farnham

+11%

+9%

Continued popularity from families moving out of London, and lack of new builds has resulted in a supply and demand imbalance

Fleet

+15%

+8%

Hart was voted the best place to live in the UK for the fourth year in a row attracting more buyers

Outstanding local schools and direct train line to London

Gerrards Cross

+5%

+5%

Good school catchments and private education choices for families

Continued popularity from families moving out of London, and lack of new builds has resulted in a supply and demand imbalance

Guildford

+6%

+9%

Highly sought-after location outside of London and lack of supply is causing an imbalance, pushing prices up

New Waitrose store opened in 2015

Henley-on-Thames

+7%

+5%

Close proximity to Crossrail and lack of new builds is causing prices to rise

Continued popularity from families moving away from London

Lower Earley

+14%

+6%

With Crossrail around the corner this area is growing in popularity

New building developments in Shinfield and Spencers Wood will help stabilise the demand, but there is still a lack of stock in the short-term, pushing prices up

Maidenhead

+7%

+10%

Increased demand due to the pending arrival of Crossrail

Continued town centre regeneration

Reading

+12%

+10%

Already experienced a 12% increase in the last 12 months

With the imminent arrival of Crossrail this area will grow in popularity

Continued town centre regeneration, in including the last major plot of Reading Prison which will be developed

New train line going into Green Park

Sandhurst

+7%

+7%

Local schools have good Ofsted ratings

Close proximity to popular transport links providing access to London

Staines-upon-Thames

+11%

+10%

Comparably cheap considering its proximity to London

Sunningdale

-4%

+5%

Lack of supply could drive house prices up during 2016

Tilehurst

+11%

+6%

With Crossrail around the corner this area is growing in popularity

Lack of supply will continue to drive house prices up

Warfield

+14%

+10%

Regeneration of Bracknell town centre

New school at Woodhurst Park could attract more families to the area

West Drayton

+14%

+10%

Already experienced a 14% increase in the last 12 months

Increased demand due to the arrival of Crossrail

On-going regeneration of previous industrial units

Expected expansion of Heathrow Airport

Windsor

+8%

+5%

Lack of supply will continue to drive house prices up

Wokingham

+11%

+6%

With Crossrail around the corner this area is growing in popularity

New building developments will help stabilise the demand, but there is still a lack of stock in the short-term

Woodley

+15%

+6%

With Crossrail around the corner this area is growing in popularity

Lack of supply will continue to drive house prices up

Yateley

+7%

+5%

Lack of supply will continue to drive house prices up

*rightmove.co.uk, correct as of 16/11/2015
 

The lower end of the market will experience more activity with the Government’s Help to Buy schemes, including the Help to Buy ISA’s, that launched in December 2015, and parental support helping first time buyers get onto the property ladder, but you will need to act fast according to Vincent Courtney: “For the past 18 months we’ve been experiencing faster sales than ever before, with new build apartment blocks selling out on the day of the launch, one and two bedroom apartments regularly receiving offers above and beyond the asking price, and town centre terraced houses creating bidding wars at our property auctions.”

 

Increased competition between first time buyers and investors

In the Autumn Statement, Chancellor George Osborne announced a 3% surcharge on each stamp duty band where the property is being purchased as a buy-to-let investment or as second home; this could result in even more competition between first time buyers and investors.

“We’re expecting to see a surge of interest from investors looking to purchase investment properties before April 2016, in order to avoid the extra charge” adds Vincent.

“I understand the frustration from first time buyers who are often competing with investors. You must concentrate on organising your finances before you even start looking; this will put you in just as good a position as landlords, and demonstrate that you’re a serious buyer.”

On the upper end of the scale house prices are also rising, with more detached properties selling than any other property type in most of the areas Romans covers. This is partly down to the ripple effect generated by London’s property market, which is resulting in many house buyers leaving the capital to its surrounding regions in search of more cost-effective property.

The Thames Valley and surrounding areas are property hot spots that naturally attract many people moving away from London, especially those that still need to live in a commutable area. The upper end of the property market tends to be slower but with the continued demand coming from families moving away from London the competition remains strong, and downsizers are enjoying fantastic capital growth.

The 2015 Stamp Duty Land Tax changes were great news for 98% of home purchases. However, those buying properties worth over £937,500 now have more stamp duty to pay; something which has affected the market in London particularly. Although there’s very little evidence to suggest this has made a difference in the south east this is a trend to watch out for during 2016.

Are there enough new builds?

The new government wasted little time in outlining plans to raise productivity across the UK, including boosting housing construction and encouraging home ownership. Under a more streamlined approach to the planning system a new zonal system will effectively give automatic permission to developers to build on suitable brownfield sites. Furthermore, Chancellor George Osborne promised to spend nearly £7bn to address the shortage of new homes in the Autumn Statement, and outlined plans to pay developers £2.3bn to build 200,000 starter homes for first-time buyers, who will receive a 20% discount on prices up to £450,000 in London and £250,000 elsewhere.

Such measures have already helped boost the house-building sector, with planning permissions and housing starts now at a seven-year high, according to Housing Minister Brandon Lewis. However, with a shortage of properties still available and a rapid increase in new households, demand is considerable, particularly in towns such as Reading where the number of households is projected to increase by 17% by 2037 (Department for Communities and Local Government, 2012-based projections).

Rapidly rising interest rates are a major threat

“Today’s marketplace is very much in the favour of sellers, however, I expect interest rates will begin to rise in 2016, reaching 1% by the end of the year” says Peter Coles. “We know it will have to happen soon and once the rates begin to rise I believe a lot of people who were sitting on the fence will decide to make their move.”

Interest rates aside, competition between mortgage lenders is currently extremely fierce and people are getting some outstanding deals; whether they’re first time buyers, remortgaging, or purchasing buy-to-let products. As the smaller, specialist lenders continue to make their mark the competition will continue, and new customers will benefit from exploring the market  thoroughly or seeking advice from an independent adviser, in order to compete with rising interest rates.

Find the best mortgage rate for you
 

Rental prices to increase by 5-10% in 2016

Average rental values across the areas Romans covers are all higher than the national average, and with tenant demand increasing it’s inevitable that rents will rise. “I predict we will be seeing at least a 5% increase in rental prices by the end of 2016” comments Peter Fuller, “with higher increases in the second half of the year following any rise in interest rates as landlords will start to expect to recover increases in mortgage costs.”

The public agree, with 91% predicting that rental prices will rise in 2016, according to Romans’ latest poll. Two specific areas which have attracted a lot of interest from investors in 2015 are Maidenhead and Reading, largely down to the pending arrival of Crossrail in 2019. Savvy investors quickly recognised the impact this type of regeneration can have on house prices and began exploring buy-to-let options.

 

What about lettings legislation?

Landlord legislation frequently made the headlines throughout 2015 from the Right to Rent policy to smoke alarm regulations. One of the biggest changes, announced in the Summer Budget, are the new buy-to-let tax restrictions which, depending on your tax status, can significantly increase landlord’s tax bills. In short, mortgage interest tax relief will be restricted to 20% for buy-to-let landlords.

Another government revelation is the aforementioned stamp duty surcharge, announced in the 2015 Autumn Statement. The surcharge, coming into play from April 2016, will increase each band by 3% where the property is being purchased as a buy-to-let investment or as second home. Investors should note that when the time comes to sell your investment property, and you’re calculating your gains for the purpose of paying capital gains tax, the stamp duty you paid can be taken into account, which will help reduce your overall gain when you sell.

Peter Fuller adds: “This may not be positive news for landlords, but it’s important to note that buy-to-let is a long-term investment and in that sense it can still be very lucrative; with house prices predicted to rise by approximately 25% in the next five years, on-going demand from tenants, and the low buy-to-let mortgage rates currently available.

“Interestingly, although there are concerns throughout the industry about the constant legislation changes, we didn't experience any drop in demand from investors during 2015 and I don’t think this will affect the lettings market as much as some experts are predicting during 2016.”

Do you plan to sell or let property in 2016?

If you’re planning to sell or let your property in 2016, it’s important to get an accurate property valuation or rental valuation so you can make an informed decision. To find out more about the local property market and to discuss your property’s value with a property expert, call 01344 985 666.

 

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