A year ago, today I shared my views on where to find value in the market in 2017. I was so pleased when I came across external validation for what I shared one year ago, on the 18th Dec, the Evening Standard shared some research that was carried out by Hamptons International showing that Hayes, which I predicted to be the area to watch out for, had the strongest growth of all postcode sectors in London, with prices rising 17% for the year.
The general views shared were also supported by what happened in the market and several of those views carry over to my outlook for 2018.
Now looking forward, where will the value be found in 2018 in the London property market? What will be the key drivers be, and most importantly what will be the big changes that we will experience in the year ahead?
The key drivers:
Demand. Demand. Demand. No matter what we look at we cannot look past the fact that we have a shortage of housing, particularly at price points below £500k. Even though 2017 had seen a record number of completion for new homes, we are still far behind the delivery required to meet demands. And demand is continually rising.
Infrastructure will again play a major role in driving price growth in localised areas. Those areas around Crossrail, in particular, will still outperform their immediate surroundings. Why? Because humans react to what they can see and experience and once people realise the actual benefit of the new transport links, there will be a further surge of demand in close proximity to the new stations.
The big changes:
Taxation. The market has already seen an impact in 2014 from large changes in stamp duty, then the additional stamp duty on second properties and then the alterations in what can and cannot be deducted for landlords as far as interest and depreciation go. As with many things, these changes will take time to reflect more in the marketplace, but data from the Council of Mortgage Lenders have shown a huge slowdown in growth in the buy to let market, almost down 2 thirds from a year ago. I predict the slowdown in the growth of the buy-to-let market for small private landlords to continue.
The London Plan. Opinions are still very mixed on the draft London plan that has just been released, however, the fact remains that it will impact the development market and thus the whole property market. There is a major concern that the proposal for a 50% requirement of affordable housing will make many projects unprofitable as well as causing developers to wait for more favourable conditions to develop and deliver projects. This is the opposite of what the goal of the London Plan is thus, to try and reduce that negative impact the government has proposed easing of the planning requirements, increasing density and opening up of more development land to create more opportunity to build new housing.
Built to Rent. The growing and establishment of a strong built to rent market will definitely impact the market. With developers and institutional investors looking for more secure or long-term returns, more and more companies are entering this exciting marketplace. I predict that the type and quality of the product will change over time and hopefully much improve.
The availability for people to find quality housing that's well managed by a professional Landlord and Managing agent will be appealing to many would-be buyers or tenants currently in less well-managed accommodation (we have all heard the stories of terrible landlords out there, undeservedly giving a bad name to a whole market segment) I also think that greater competition for tenants will dissuade several would be new landlords from entering the marketplace, and help established (good) landlords showcase their value offering to tenants and thereby increasing returns.
So where does the value sit in London for 2018?
- Quality affordable accommodation, whether its providing units for sale or rent.
- Areas of regeneration and infrastructure improvements, again the lower price point areas are likely to perform better.
- Commuter towns on the outskirts of London that have not yet seen as large price increases over the past 24 months.
I would love to hear your views and opinions and challenges to my thoughts and views.
Do you want to talk about my thoughts and outlooks for specific areas, please message me to start the conversation?
Wishing you and all the people close to you, a very merry Christmas and a wonderful New Year.