In many ways, we have the property market to thank for the economic recovery that unfolded after the a long and arduous global recession. After all, this market has enjoyed almost relentless growth over the course of the last 18 months, empowering buy-to-let landlords and international investors with a passion for London real estate.
The next 12 months could play out a little differently for the UK property market, however, as both internal and external factors combine to impede growth. It is well worth considering these and their potential impact on the market, as you consider selling your property and tailoring your portfolio to suit the prevailing climate.
With this in mind, let’s consider a select few economic events that may impact on the property market during the next 12 months: –
Rising Interest rates and more stringent buy-to-let legislation
The decision of the UK government to crackdown on the buy-to-let market was a controversial one, as this was essentially an attack on one of the main economic engines of the last 18 months. By increasing buy-to-let stamp duty and eradicating many of the tax benefits associated with this sector, there has been a rise in the number of evictions and a rush to sell real estate.
While this is having a positive impact by increasing the number of homes available for sale in the UK, it is also undermining growth in the rental market. A rise in the number of listed homes may also be undermined by two proposed interest rate hikes of 0.25%, which would raise mortgage interest rates and home-owner repayments.
These rate hikes may now be deferred until 2017, which should provide at least some relief for the marketplace.
Brexit and the return of sovereignty
Brexit is the most talked about political issue at present, and one that will have a huge impact on the property market. While the long-term impact is likely to be relatively moderate once a decision has been made either way, the near-term market has suffered amid increased volatility and uncertainty. This is causing property shares to depreciate at a considerable rate, while the levels of activity in the market are also declining as buyers and investors adopt a risk-averse approach.
This is likely to continue until the June referendum at least, restricting growth and damaging the economy in the short-term.
The Threat of a global recession
Ever since the final financial quarter of 2015, financial experts and the world’s leading banks have forecast the onset of a global recession. This economic downturn is forecast for the end of the year, while the mere threat of such a decline has been enough to hold back share prices and create panic among real estate investors.
Once again, it is the threat of a recession that continues to create uncertainty, and this is likely to continue at least until the final financial quarter of 2016. This may also trigger a decline in property market activity in the short-term, while the onset of a recession could also see millions of home-owners encumbered by negative equity.