Jerald Solis, Director at Experience Invest, the London -based property specialist and a leading supplier of high-performing UK investment opportunities took time out from a busy start to 2020 to chat to the editorial team at Design & Build UK about the upcoming trends that are about to affect the property sector in the next 12 months.
We began with the elephant in the room, Boris Johnson, a general election and Brexit, as the new Prime Minister has had little time to celebrate his party’s resounding success in December’s election as the arrival of the new year has brought with it a host of urgent challenges and a very pressing deadline.
On 31st January the UK’s departure from the European Union (EU) will be confirmed. Beyond that, the new Conservative majority government has pressing domestic issues requiring attention; issues that have, in many people’s opinion, been overlooked over recent years due to Brexit.
Meanwhile, developers, property owners and investors will all be assessing how to best plan for 2020 and the political change that seems sure to come. To that end, we explore some of the more pertinent trends that look set to shape the property sector over the coming 12 months.
One can say with almost absolute certainty that the Housing Crisis will remain an ever-present topic in the UK media this year. Such is the shortage of available housing across the country, there is a great deal of public interest when it comes to construction activity.
The Tory Party has restated its promise of ensuring 300,000 new houses are added to the property market each year by the time we reach the mid-2020s. And by the end of the current parliament (2025), Johnson et al have promised to build a million new homes.
Yet for such ambitious targets to be met, it is essential that there is more collaboration between the public and private sector. The Government can help through boosting its spending commitments, improving physical and digital infrastructure, and reforming planning regulation to make it easier for new developments to go ahead.
Ensuring there are enough construction sector workers after Brexit will also be a critical challenge. There are understandable fears surrounding how the UK leaving the EU will affect construction firms; according to research by TowerEight last year, 35% of construction workers say Brexit has created a shortage of EU migrant labour in the UK construction industry, which has already increased project costs.
This is an issue that must be addressed. On the one hand, more must be done to encourage young people in the UK to ply their trade at all levels of the construction sector – apprenticeships, college courses and job opportunities must be made available to support this; simultaneously, the Government must ensure Brexit does not result in construction workers leaving the UK or prevent skilled, much-needed EU workers entering the country after 31st January.
The two Bs
The first three months of 2020 will be defined by two Bs: Brexit and the Budget.
Shifting the focus away from construction activity to the property market, the passing of the Brexit deadline is expected to result in an upturn in market activity. Recent research by Experience Invest certainly supports this view.
In Q3 2019 Experience Invest surveyed more than 1,000 UK property investors, finding that just over half (51%) of the respondents were confident there will be an increase in property listings and sales once Brexit is complete. What’s more, the majority (55%) also admitted they had paused on their investment plans over the course of 2019 as they awaited the outcome of Brexit.
Just six weeks after the Brexit deadline comes the 2020 Spring Budget.
The annual fiscal announcement – which was cancelled last year due to the election – is always a noteworthy event. However, given this is the first one since the election, the first one under a new Prime Minister and Chancellor, and the first after the Brexit deadline, the Budget on 11th March will take on added significance.
Based on the promises made in the Conservative Party’s manifesto and election campaign, one can expect potential changes to stamp duty. There will also likely be promises around new-builds – not just construction targets but also reforms to ensure new homes are ‘more beautiful’.
Property prices to grow, but probably not in London
The final trend we should see in 2020 is for house prices to rise, but not everywhere. This is a continuation of what the data has told us over recent years.
Since 2010, the average UK house price has risen from £167,469 to £232,944. This is impressive given that the past decade included the aftermath of the global financial crisis, four general elections, three new prime ministers and the Brexit saga.
A poll conducted by Reuters among 27 property market analysts stated that on average they expect UK house price to increase by 1.5% in 2020 and 2.3% in 2021.
But, as I say, looking at UK-wide figures can be dangerous; in truth, the poor performance of the London property market since 2017 has skewed the national statistics.
Last year Zoopla released some data that highlighted this point nicely. Looking at the first six months of 2019, it found that on average a property in London fell in value by £71.23 each day. Conversely, houses in the West Midlands (+£36.58), South East (+£35.32), North West (+£20.39), Wales (+£18.03), Yorkshire (+£12.37) and North East (+£6.97) all rose in value.
It underlines the importance of taking a more regional focus when assessing property price trends. And in 2020, it looks like that many regions outside of London will outperform the capital in term of house price growth.
Jerald Solis is Business Development & Acquisitions Director at Experience Invest. Experience Invest provides property investors in the UK and overseas access to exclusive investments across a variety of asset classes. The London-based company has been running for 15 years, working closely with developers and investors to deliver excellent real estate investment opportunities.