What will 2019 bring for the Struggling Housing Market?
Em Morley - December 21, 2018
The property industry is looking ahead to what 2019 will
bring for the UK’s struggling housing market.
We all know that 2018 has been a turbulent year for the
housing market, with huge changes across the private rental sector, continued
pressures on social housing, and no let up in the difficulties that people face
in getting onto the property ladder.
Alexandra Morris, the Managing Director of proptech firm
MakeUrMove, discusses the greatest issues that will affect the housing market in
“It’s hard to make any
predictions for the housing market without talking about Brexit and its
potential implications on all sectors of business.
“Of course, we still don’t
know whether or not Theresa May’s Government will be able to secure a deal that
will be beneficial to lenders, tenants, landlords and homebuyers alike, or if
we will crash out of the EU with no deal at all.
“The biggest impact of a no-deal
Brexit in relation to housing is a potential fall in house prices – the Bank of England has warned that it could lead to a fall of up to 30% in house
prices, although this is very much a worst-case scenario. As a result of a
fall, even a smaller one, many homeowners could find themselves in negative
“The industry is hopeful
that this would be a short-term blow, but I expect that the housing market will
slow down dramatically in 2019, as home movers slam the brakes on plans to buy
or sell, adopting a wait-and-see policy.
“A fall in house prices
because of a no-deal Brexit may provide some opportunities for property to be
bought by first time buyers next year. However, because it will be a time of
uncertainty, it’s likely that people will be more cautious about making
commitments such as buying property. Buying conditions may also become more
difficult. Instead, it’s likely larger landlords will grow in 2019 as they
acquire these properties, because they will be able to spread the risk.
“With uncertainty about the
rights of EU workers if the UK leaves without a deal, areas of the country
where landlords provide accommodation to large EU migrant communities could
also be affected next year. If EU workers return to the continent, there will
be a host of empty houses and flats. Landlords will be hit financially if they
can’t find new tenants to let the properties.
“This will have a knock-on
effect on rental prices. In areas where there is then an oversupply of rental
properties, landlords will be forced to reduce rents or sell.
“On the other hand, leaving
with a good deal could drive the market upwards in the latter part of 2019, as
strengthened consumer confidence leads to stability, which is what we need in
the industry right now, after such a prolonged period of uncertainty.
“If Theresa May can secure
Parliament’s approval on her deal with the EU, we will have until December 2020
before anything fundamental changes, and, during this transition period (which
could yet be extended), we will still be subject to existing EU regulations,
giving the industry a much-needed adjustment period.”
The tenant fees ban
“The private rental sector
has undergone significant changes in 2018, and there’s no sign this will change
in 2019. Tenant fees legislation continues to progress through Parliament, and could
be the biggest change the sector has seen for decades.
“We’re confident tenant
fees will be banned in 2019, but, although this has been hotly anticipated for
spring, I predict that it will be autumn by the time anything comes into
“Whilst we always welcome
regulation to support tenants, it needs to be carefully thought through. The
bill has a much wider impact than simply removing tenant fees, and it’s likely
to have many unintended consequences. In 2018, we carried out research and discussed
this matter with our landlords and tenants to gauge their response, and, whilst
landlords are understandably nervous, it’s clear many tenants don’t appreciate
the additional long-term costs they are likely to face, with 85% of tenants
saying they don’t understand the ban and a quarter unaware it could lead to a
“Our fear is that, while
the Government’s intention was to make the private rental sector more
affordable and fairer for tenants, they will likely end up worse off. Unless
letting agents can transform their business models, many landlords,
particularly the smaller landlords – who make up the biggest proportion of the
private rental sector and often operate on very tight margins – will be forced
to raise rents to cover the increased costs they will incur as a result of the
“We are working hard to
develop a new technology solution, which will ensure that our landlords don’t
face additional costs, and, as a result, tenants who rent their properties
through our portal won’t have to shoulder any rent increases.”
“The introduction of Section 24 has had huge implications for UK landlords, and will
continue to in 2019.
“The act, which started in
April 2017, is being phased in gradually over four years. It means that
mortgage, loan and overdraft interest costs will not be considered when
calculating taxable rental income, and will ultimately see many landlords
paying more tax on their property income.
“As per the tenant fees
ban, this could mean that smaller and accidental landlords, who operate on
small budgets, could end up passing these costs to tenants by increasing rents.
Considering that these landlords are currently propping up the UK housing
market, the act spells disaster for the housing market as it rolls out throughout
“Next year, we hope to
finally see new legislation introduced which places more focus on electrical
safety within the private rental sector.
“However, with research by
the Government showing that tenants are more likely to face electrical shocks
and fires caused by electrical faults in their private rental property than
those in social housing, it needs to be clear to landlords exactly what their
responsibilities are when it comes to electrical safety. The current
legislation is confusing and can cause misunderstanding. For example, landlords
are not required to have an electrician carry out an annual inspection for
their portable appliances, but they do have an obligation to check their safety
throughout the tenancy and not just at the start.
“We welcome any changes by
the Government which make electrical safety a mandatory aspect for landlords,
as it will ensure both the landlord and tenant are protected, should any
electrical faults arise.
“The housing market is
currently suffering from market failure. This is one of the biggest problems
our economy faces next year.
“A major worry for 2019 is
that, with Brexit and other issues dominating the agenda, the Government will
be distracted, taking their attention away from solving the problems we already
have in the housing market.
“We saw this in the 2018 Budget, where, despite the complete failure of the housing
market, only small concessions were made on housing.
“What’s more, the
Chancellor announced that the Government is going to consult on lettings relief, with a view to reducing the amount of Capital Gains
Tax relief that landlords get.
“The move will particularly
affect the UK’s accidental landlords in the coming year, many of whom purchased
at the height of the market and are renting out their properties after being
unable to sell them. This is a phenomenon that picks up when market activity
slows, exacerbated by a reluctance among buyers to commit to a big property
purchase, which is largely being driven by Brexit uncertainty, and the fear of
a no-deal Brexit related crash.
“If, after the consultation
in 2019, as the Chancellor outlined, the relief only applies where the owner is
sharing occupancy of the home with the tenant – and the final period of
exemption from Capital Gains Tax is reduced from 20 months to nine months – the
Government will be actively discouraging stock into the private rental sector.
suggests the Government will continue to move in the direction of professionalising
the market in 2019; they appear to want to reduce the numbers of private
landlords and replace them with larger portfolio landlords, who run their
properties as a business.
“If this is
true, smaller landlords, who make up over 90% of the market, will be
continually penalised. The Government needs to realise the true value of these
landlords fast, and bring in legislation to support them, or they risk a mass
exodus of smaller landlords from the rental market.”
What do you
think of Morris’ predictions for the 2019 housing market?