Should Homebuyers be Worried About Housing
Market Stability in 2017?
The results of the latest Building Societies Association (BSA) property tracker survey show UK consumers are worried about the impact rising living costs and interest rates could have on the property market in the coming year.
The survey, carried out by YouGov on behalf of the BSA, shows that the post-referendum spike in housing market confidence was short lived with fewer prospective homebuyers believing now is a good time to buy a property than three months ago.
In the latest survey, just 27 percent of respondents said they believed now was a good time to buy a property. Equal numbers of people (38 percent) were concerned that an increase in the cost of living or an interest rise could damage the market over the coming year. This compares to 31 percent of consumers who felt it was a good time to buy a property in September.
What are buyers' main concerns?
Although a quarter of consumers agree that now is a good time to buy a property, with just a fifth (21 percent) disagreeing, there are concerns about the stability of the housing market that are linked to the rising cost of living and borrowing costs. But are these concerns justified?
Andrew Gall, chief economist at BSA, said: "Inflation is expected to pick up in 2017 whilst wage growth remains weak, so these concerns are not misplaced. There is a great deal of uncertainty around the strength of the UK economy since the vote to leave the European Union, and this is reflected in the Property Tracker results. Potential house-buyers will understandably want to have as clear an idea as possible of the impact on their finances before making significant decisions."
What do the experts say?
While the concerns of some consumers may be justified, property has and continues to be one of the safest investments that we can make. With demand for housing consistently outstripping supply, that is not something that is going to change anytime soon. The result is a general curve of rising average prices over the long term.
â— House prices . The Royal Institution of Chartered Surveyors (RICS) predicts house prices will rise by three percent next year as the number of transactions stabilise. RICS believes property values will rise in each region of the UK, with East Anglia, the North West and West Midlands recording higher gains than the national average. It also feels prices in Central London will stabilise following recent declines, with the weaker exchange rate encouraging foreign buyers.
â— Buy-to-let . Landlords face more changes in 2017 in the form of tougher affordability checks for buy-to-let mortgages. The Council of Mortgage Lenders predicts this, combined with the second home stamp duty rises last year, could dampen activity in the sector. However, it is also unlikely that investors will lose their appetite for buy-to-let given the lack of viable alternatives.
â— Interest rates . Record low interest rates have increased the appetite of property buyers, and although consumers expect to see the Bank of England base rate rise in the coming year, the experts do not necessarily share that view. Roger Bootle, one of the few economists to predict that interest rates would remain at rock-bottom levels for so many years after the financial crisis, has forecast no change to the base rate in 2017, although he does say it could rise by 3 percent by the end of 2019.
â— Wage growth . Despite worries of stagnant wages, British workers could find themselves with growing pay packets this year as low unemployment combined with strong global economic growth drives up wages. Economists believe wage inflation will rise from 2.4 percent in 2016 to 2.9 percent in 2017, further allaying consumers' fears.
Despite understandable concerns that the housing market could struggle in 2017, the experts actually paint a very different picture and one that should bring prospective homebuyers and buy-to-let investors plenty of cause for optimism over the coming year.
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