Twenty sixteen was another hectic year for the UK’s housing market. The constant need for more new homes continued, prices increased and then the effects of the UK’s EU referendum were felt. Plus, there was a change in government in amongst all that. These factors all had a big impact upon the UK economy last year and the housing market.
In 2017, the economy is set to continue to be affected by a lot of uncertainty and volatility, which will impact upon new house building projects in many ways.
House price growth predictions
UK house price growth is predicted to slow throughout 2017, with property prices rising by 5.7% in the year to the end of January, slower than the 6.5% annual growth the month before. Compared with December, property prices actually dropped by 0.9% as well, providing a less than positive start to the year for the industry.
There are a number of factors which have been pointed to for a predicted slowdown. These include fears about rising inflation, general living costs going up and interest rates. With a more uncertain and weakened UK economy, these elements will hold back house price growth and affect the buying power for those interested in new builds.
Government housing policy
Despite a change in Prime Minister in 2016, the Conservative party remains in power. Given that one of Margaret Thatcher’s policies was to create a home-owning democracy, the government’s latest proposals regarding their housing policy could be viewed as somewhat surprising.
Rather than simply setting out plans to build more homes, there is to be a major shift in housing policy, which will place more emphasis on renters. The plans aim to create more affordable rental properties, which is a change in tone from the party’s previous leaders. This has been developed based on current living habits and the state of the UK economy, which has made it a lot harder for many young people to afford to buy their first homes.
New home production levels
In 2016, the number of new homes registered reached their second highest level in almost a decade, with over 150,000 created. Since the housing crash of 2008/9 these have increased by around 70%, which represents good growth for the industry last year.
However, it still falls well short of the government’s aim to build one million new homes by 2020, with various factors including a weakened economy preventing this target being met. The UK will be looking to literally build on this figure in 2017, but will need the finances, resources and plans to increase the number of new house building projects across the country.
The UK economy cannot be talked about these days without mentioning Brexit. It has introduced such levels of uncertainty and volatility into many markets. While this has created many excellent opportunities traders and investors involved in share dealing, for the housing market and especially new building projects, it has introduced further uncertainty in to the industry.
The uncertainty of such negotiations and what they will provide has resulted in the possibility of less investment, a potential skills gap in the market (if the UK leaves the single market) and more problems on the horizon. This could be the greatest challenge to new house building projects in 2017, depending on the outcome.
Ben Barlow is UMS Content – freelance financial writer.