It says a lot about the overall strength of the UK housing market that it is holding together quite nicely in spite of everything which has been thrown in its direction recently. Even the UK housing market, however, has its limits and 2018 may well turn out to be a slow year for UK property.
While it may be tempting to blame this on Brexit and, to a certain extent, this may be a factor, in some areas perhaps even a fairly important one, there are, in fact, several other reasons why the UK property market could be due to slow down.
Issues with existing housing stock
There are two issues with the current supply of UK housing stock. The first is that there is an overall lack of it. The second is that demographics and lifestyles have both changed significantly since much of it was built with the result that there is a clear disconnect between what is available and what a significant percentage of buyers want.
One clear example of this is the shortage of accommodation targeted at retired “empty nesters”. This gap encourages older people to stay put in their family home and thereby reduces supply right back along the chain (or down the ladder) to first time buyers. Basic economics dictates that where there is low supply and high demand, prices will rise, but if the lack of supply puts people off even trying to buy, demand will fall off, keeping prices low and further discouraging sellers from putting their homes on the market.
The stamp duty hike of 2014 is anything but a distant memory and the 3% “landlord surcharge” even less so. Both of these added to the effective prices of certain properties and hence impacted affordability. The “first-time-buyer discount” of the Autumn budget is a much newer change which should stimulate demand amongst first-time buyers but how this works in practical terms remains to be seen. Again if a lack of “empty-nester” property stops older people from downsizing then the impact will be felt all along the chain, meaning that even with the stamp-duty discount, first-time buyers may still find themselves struggling to locate property which is suitable, available and affordable.
Economic “interesting times”
It’s hard to know where “Brexit” issues end and general economic uncertainty begins. Possibly the two go hand in hand. The fact of the matter is that over the course of the last couple of years, the UK has seen two general elections with a referendum sandwiched in between them and the first rate hike in over ten years. That in itself is arguably enough to make many people pause for breath and certainly to make them think long and hard before taking major life decisions such as the decision to buy or sell a house.
It’s also worth noting that although the Chancellor, has, as yet, avoided making sweeping changes to either income tax or national insurance in general, the publicity around the changes to tax and NI for self-employed people may have helped to set the employed wondering if they will be next in line, which could add to a sense of caution relating to major financial decisions.