New analysis has revealed that the British housing market is expected to stay strong and active as the process to leave the EU completes.
Of course, turbulence is expected, but the latest forecast from real estate firm JLL suggests that there will still be moderate growth. It is thought that the residential market will pick up in earnest from 2020.
Article 50 is expected to be enacted by March 2017, with the country due to leave the European Union in 2019.
In a statement, the firm said: ‘Demand will be undermined in the short term by uncertainty and a more subdued economy while supply issues will exacerbate, lending support to prices. The perennial issue for the housing industry remains supply and we are pleased that there seems to be fresh impetus in this regard.’
‘The big question, however, is whether policy initiatives target short term supply improvements, or look beyond the immediate horizon to create lasting, long term solutions,’ it continued.
JLL predicts growth of 0.5% across Britain in 2017 and 1% in 2018. Growth is then expected to rise to 2% by 2019, 4% in 2020 and 5% in 2021. There are however, differences by region.
Scotland is forecasted to be flat during 2017, then record growth of 1% in 2018, 2% in 2019, 3% in 2020 and 4.5% in 2021. Wales is expected to see less growth, but catch up by 2020. Prices in the country are predicted to fall by 1% in 2017, rise by 0.5% in 2018, 3% by 2019, 5% in 2020 and 5% in 2021.
Neil Chegwidden, head of JLL residential research, believes the outlook for the property market is driven by the widespread positive attitude being adopted within Britain. He notes: ‘Much will depend on the trade agreements negotiated, but with greater certainty the economic outlook should brighten along with consumer and business confidence as we head in 2019.’
‘We expect the UK housing market to be more subdued over the next two to three years. However, it will remain reasonably active with little chance of meaningful price corrections. Assuming Brexit negotiations are not too detrimental, we could see a rebound in London housing markets in 2020, before the rest of the country follows.’
UK residential market to be strong throughout Brexit process
House building slowdown
Continuing, Mr Chegwidden said that house builder activity could drop from its current rate. ‘Although levels of new housing delivery were still woefully low prior to the referendum at least the direction of travel was positive and encouraging. This will now fall back again. We are predicting England starts to drop to 134,000 units next year.’
‘In London, we expect the house building slowdown to be more marked. Not only is London’s economy more vulnerable to Brexit but the housing market is also more reliant on investors, both domestic and international, and is hence more susceptible to buyer confidence,’ he added.
The report also shows that the forthcoming five year UK economic outlook is uncertain, with much depending on the nature and details of Britain’s exit from the EU. JLL said it assumes there will be a ‘hard Brexit’ with access to the single market disregarded.
However, the statement concludes by saying: ‘Despite this, the economic prognosis is not too detrimental for the UK. There is clearly downside risk to this quite benign outlook, if trade agreements and financial sector passporting rights are not favourable. However, this base assumption also implies that there is significant upside potential too, so the economy could prove more robust next year and could also expand faster thereafter.’