Are Property Investors Becoming more Confident?

UK Housing Market

Having faced nearly an entire year of Brexit delays, the 2019 general election proved to be the turning point in seeing Brexit come to fruition. By securing a majority Government, Prime Minister Boris Johnson’s gamble clearly paid off.

The clarity this has gone on to provide has been positive as a whole for the economy. Sterling pound has risen substantially as a result of this clarity, with both UK based and overseas investors pouring into UK assets. Whilst this ‘bounce’ in activity is not out of the ordinary after a significant political event, the momentum continues to build. This raises the question, is this just ‘hype’ or a positive sign of things to come?

Focusing on property, the signs are promising so far. According to Zoopla’s UK Cities Price Index, demand for UK property has exceeded almost all experts’ predictions. Demand for UK property has grown at its fastest rate since September 2017, a rate of 3.9% to January 2020, with this average expected to rise over the coming months.

With such impressive growth, and with buyer appetite for UK property assets seemingly only increasing, this has a positive effect on the housing market, particularly for investors. Although we see a rise in house prices, the significant capital gain that can be acquired combined with growing rates of achievable rent should the plan be for use as a buy-to-let will be attractive for property investors, and anyone else that owns a home.

The importance of the Spring Budget

We can therefore ascertain that buyer confidence is currently high with a Conservative Government and some clarity over the UK’s position within the EU. However, we must think critically about the long-term effects of the current Government.

Boris Johnson’s administration is likely to be in power for the next five years, give or take. The Government have a host of issues that seriously need addressing if we are to see a truly heathy property market. Of course, Brexit will take the headlines and the majority of talks over the coming 12 months, particularly as negotiations have only truly just begun.

But the importance of the property market remains pivotal in holding up the strength of the UK economy. The Government must proactively and be innovative to address the issues in the market that have been overshadowed by Brexit in the past few years.

What many people are unaware of is the UK is actually currently in a housing crisis. With this being the significant issue to address, investment in the UK’s regional hubs will also need addressing. A confident and alternative approach for the vision of the property market and the country as a whole will need to be announced to continue to inspire confidence in the market for investors and consumers alike.

What could the Government introduce?

Here at FJP Investment, we have closely followed the progress of the UK property market and what we feel could be introduced to improve activity in the market.

At the turn of the New Year, we surveyed over 750 certified property investors, uncovering their sentiments towards the policies that have been proposed by the current Government. With a focus on the property market, the result proved to useful and somewhat surprising.

Having asked a range of questions, one that stands out is that 70% of investors are in favour of the Conservative party’s proposed 3% stamp duty surcharge for overseas investors. With talks of reforms in stamp duty for years now, most would agree that this would free up much needed property for those that really need it, first time buyers being an obvious demographic here.

Another major area of focus is in the quality and attractiveness of new build properties, particularly in the way of affordability. The construction of new build properties is currently falling short of the Government’s much needed target of 350,000 new homes per year.

Due to the lack of character, higher than average prices and underwhelming build quality, consumers are generally unwilling to invest in a new build property. The Government need to build a better relationship with developers to find new ways to improve the quality and make these properties more affordable for those trying to get on the property ladder.

The Government have said that they are going to encourage local resident more of a say in the style of new build developments, something that the majority of investors support (68%). On top of this, three fifths (60%) of investors support the banning of new build properties being sold as leaseholds, further support for first time buyers.

The buy to let market is also another area that investors consider important to address. Over a third (36%) are asking for a softening of regulations and tax surrounding buy to let landlords. With landlords having to pay more tax and abide to stricter regulations since reforms in 2010, interest in the buy to let market has continued to dwindle, with alternative ways of making money surfacing in the market.

The momentum must continue

The research clearly shows that there is support in the market for a number of the Governments proposed changes in the market, with the majority of investors supporting the key policy ideas.

This includes the stamp duty surcharge for overseas investors, giving local residents a say in the future plans for new build properties and reforms in the buy to let market. With the year now well underway, most will now be asking whether the Government will actually follow through with these promises.

Whilst there continues to be many uncertainties we will face in the future, particularly over the coming year as the Government continues to negotiate the countries exit from the EU, we cannot ignore the positive signs we have seen in the wider economy.

The UK is still an attractive location for overseas and UK based investors, as demonstrated by the injection of capital we have seen in the market since the 2019 General Election. The Government needs to build on this momentum and act on the challenges in the market proactively, and we will no doubt be in for an exciting year.