What's next for house prices? Romans' property predictions

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2 Jan 2018

Government changes reignite property market putting buyers and tenants back in the driving seat

Author: Antony Gibson

2017 has been another year full of surprises, political changes and conflicting headlines. As the year draws to a close, Romans’ Directors have reflected on the big changes in 2017 and what they predict will have the biggest impact on the property market in 2018…

Antony Gibson, Managing Director of Sales at Romans says: “Over the past two years, there is no denying that transaction levels and price growth have steadied as buyers and sellers took a wait and see approach following Brexit, the US election, the UK election.

Buyers now have more information at their fingertips than ever before and affordability has been limited due to stricter mortgage lending criteria, the prospect of increasing interest rates and inflation growing faster than wages. Sellers, whilst able to set asking prices, will better recognise that buyers and their limited affordability will be a big factor in determining the final property sale price. However, the balance is that there remains to be a strong demand for property and supply fails to meet needs – so, when applying simple rules of economics, the lack of supply is likely to keep the market moving in a broadly upward direction.

The government’s announcement that first time buyers will be exempt from paying Stamp Duty, is not only great news for first time buyers, but also the housing market in general. More activity at the lower end of the housing market is a benefit to everyone as the increased confidence will filter up. Those looking to take their second step up the property ladder will now benefit from more prospective buyers and new homes developments are also likely to see more interest.

Our prediction for this year is that the market will remain steady, confidence in it will increase and many of those who had put moving on hold in 2017 will choose to move in 2018 recognising that putting their lives and moves on hold benefits no one.

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Michael Cook, Managing Director of Lettings adds his predictions for the next 12 months, “The rental market remained stable in 2017, there was a strong demand from tenants throughout the year and, in August we set a new record for the number of tenants moving in! Although in some market places average rents remained flat, many of our locations demonstrated a growth of between 1-2.5%.

With a healthy demand from tenants and, slightly reduced capital values in some locations, it’s unsurprising that 1 in 4 of all new buyers who registered with Romans were looking to purchase a buy-to-let property. Despite the high number of registrations, only 1 in 8 properties were sold to investors. This uncertainty is most likely a result of the changes made by the government to tax relief for landlords as well as the increase in Stamp Duty and of course, the impending Brexit deal.

Whilst the political landscape is unclear and will no doubt cause some investors to pause and think before committing to a purchase, we believe the rental market will provide consistent returns for landlords with no real signs of tenant demand abating. Although, returns may not be as buoyant as previous years, we predict increased rents of around 1-1.5%.

With rents slowly rising and the introduction of legislation to regulate the industry (something we’ve campaigned for as members of ARLA for some time), tenants will benefit from an improved financial position. Following in the government’s footsteps, we are looking closely at how we can positively impact the lettings market for landlords and tenants alike.

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With the recent rise in interest rates, we asked our Mortgage Director, Greg May to predict what will happen in 2018 and explain the importance of reviewing your mortgage annually.

“Financial experts predict that there will be another rate rise on the cards for 2018 which is great news for savers and those who are currently sitting on a fixed rate mortgage. Whilst future rate rises aren’t likely to cause a financial crisis thanks to the stress testing lenders have placed on applicants to ensure repayments remain manageable if rates rose by between 5 and 7%, those sitting on standard variable rate mortgages may find they are overpaying unnecessarily.

I recommend reviewing your mortgage annually, just as you would your gas and electricity bills to ensure you are on the right product for your circumstances. With a future rate rise almost a certainty, this is now more important than ever.”

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The rate of price increases has certainly slowed but by no means stalled. Slow, consistent growth is the signs of a healthy market and is not a reason to put moves on hold. The biggest challenges to the property market are government changes including the increase in interest rates and Stamp Duty, which limit buyer and tenant affordability. The slight fall of transaction levels in 2017, along with steadying prices does mean that mean that accurate pricing and understanding of demand in the local market will be key success drivers for both sellers and landlords in 2018.

For expert advice on selling your home contact your local property experts for a free, no-obligation valuation on 01344 985 666 or, if you would like to rent out your property, speak to our property investment team on 01344 985 870.

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