Industry Roundup – July
Explore the UK Property Market Trends from July 2019.
- The announcement of a new Prime Minister has shaken up the industry
- Transaction sales have dropped but are expected to regulate in the next few months
- London rents are beginning to stabilise as rental demand increases alongside new legislation
In our July industry roundup, we examine the property market trends that are shaping the property landscape and the outlook for the residential market going forward.
Yes, Prime Minister
As we enter the second half of 2019, the property market is still reacting to the announcement of the new Conservative leader and Prime Minister Boris Johnson.
With promises to ‘sort out Brexit’, the onus is now on the Prime Minister to bring an end to the uncertainty that has been plaguing the sector.
According to Head of Residential at Carter Jonas, Lisa Simon, “Brexit has continued to be something of a grey cloud that has loomed over the top end of the market for nigh on three years now and continues to be a driving force behind its instability – especially in prime central London.”
Johnson’s plans to create more movement at the top end of the funnel would create a more clear path down the chain but there’s still the issue of affordability and availability in the mass market. Similarly, his promises of tax relief and stamp duty reform bode well for investors but rely entirely on his ability to hold his position in the event of an election.
Regardless of personal policy, there’s no denying that ending the ‘Brexit conundrum’, one way or another, would be a huge step in reversing the stagnation affecting certain areas of the market.
Property Sales Drop Substantially
According to data from HMRC, the number of property transactions decreased by nearly 10% since last month and over 15% when compared to the same timeframe in 2018.
One theory for how this has happened has been put forward by Mike Scott, Chief Analyst at Yopa:
“The most likely explanation is that the uncertainty of the impending Brexit deadline caused home-buyers, especially cash buyers, to hold back from agreeing purchases in the first three weeks of March, before an extension was agreed, and that these delayed sales would otherwise have gone on to complete in May or June.
“We therefore expect that the year-on-year comparison will start to improve in the July figures, and will be fully recovered by the autumn, at least until we start to see the effects of the new October deadline around the end of the year,’ he added.”
Tomer Aboody, director of MT Finance – a property lender – believes the drop off in statistics is ‘astonishing’ and blames another contributor: “Affordability is an issue, coupled with uncertainty around Brexit, which is having a huge impact on people’s decisions about whether to move or not”.
Prime London Rents Begin to Stabilise
The analysis shows that rents in the prime London market are not expected to decline by any ‘meaningful’ amount in the short-term future. In research by Knight Frank, data showed that the ratio of new tenants to new lettings rose to 6.8 in Q2 of 2019, the highest it’s been since 2009.
Whether it’s down to increased demand from people looking to rent due to political uncertainty or a positive attitude to renting with the integration of the Tenant Fee Ban, rents have increased by 0.2% on a quarterly basis while the number of agreed tenancies increased by 18% over the last 12 months.
Tenant Demand Rises Nationwide
Demand from tenants looking to move into a new property increased by 7% between May and June – a rise seven times larger than the previous average of just 1%.
Askings rents are also at a new record after rising nearly 3% a year. Demand is almost certainly still outstripping supply, with more emphasis on quality property. More Build-to-Rent properties with premium facilities and higher rental yields may also be adding to the average increase.
Roundup of Property Market Trends
The next few months will be crucial for the market, especially in the run-up to October when Brexit should be finalised. While sales have dropped because of uncertainty, it’s expected that delayed sales will complete while an answer on the Brexit deadline later in the year will clear any other blockages throughout the chain.
Demand also still remains a problem for the market – with legislation such as the Tenant Fee Bill driving unprecedented numbers of new tenants into the market. It’ll be interesting to see the impact of a shift to more ‘quality’ developments will have on the wider market in the next few months.