How much can the economy, and the UK housing market, be expected to take? Covid-19 has delivered the deepest UK recession for more than 300 years, albeit one that mainly happened several months ago. Now, while we should not make any assumptions until the clock has struck midnight, the warnings of a no-deal Brexit have grown further.
There was a time when this prospect would have been met with outcry from everybody who is associated with the housing market. But, when it has already have been hit with such an enormous shock like a global unprecedented pandemic, it does put other things into perspective.
This does not mean that a no-deal Brexit would not cause disruption or economic damage. According to economists that we have heard, it’s abundantly clear such an event would hinder the economy’s post-COVID-19 recovery even further.
All of these, in normal circumstances, would be bad news for the housing market, however, the housing market has in fact taken on huge momentum meaning there has been a 1% rise in November, which is a 5.8% increase on 2019. Incredible news especially under the circumstances!
The Bank of England, published in December, stated that they had no concerns for either the banking system or the housing market. A cause for hope for property investors and landlords.
This is because the mortgage conditions have tightened in response to lender concerns about the economy. Having been at unusually low levels new mortgages have increased in recent months and high loan-to-value mortgages are harder to obtain.
Thankfully, this has not prevented the revival in the market to date. This is also with the rumblings from Whitehall about a proposed abolished of Section 21 no fault evictions – which would be a seismic change in the Landlord and Tenant Act and have major ramifications on the property investment scene generally.
Mortgage approvals in the ten months of 2020 up to October were at a similar level to that over the same period in 2019 according to recent surveys. More recently monthly mortgage approvals rose to their highest level since 2007.
All this aside, of course, there are still concerns about what will happen to the market next year. The predictions lean towards a slight softening as we go into the winter, with the new buyer enquiries slipping from +42% to +27%.
At the beginning of the year, the figure for expected sales was -21%, but luckily, tenant demand was stable, though new landlord instructions were down.
The fears in the selling market have arisen from a combination of the rising unemployment which is expected and the stamp duty holiday ending on March 31 next year.
The UK has one of the gloomiest forecasts for house prices once the support for stamp duty is pulled away. It predicts an annual house price fall of 3.5% next year, followed by a further drop of 2.6% in 2022.
That is, however, on the assumption, of a smooth Brexit!
The housing market has defied expectations this year. In fact this year has defied all our expectations in general. The question is whether the housing market in the UK can continue to surprise and continue its steady growth despite all the surrounding turbulence. At Horizon Lets, we would not necessarily bet against it!!!
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