More sales, higher prices, and higher rents could be on the way this year
After a sluggish 2017, the outlook for property investment in 2018 is much rosier, though the pickup is likely to be gradual at first, speeding up as the year progresses. It is the conclusion from the latest survey by the Royal Institute of Chartered Surveyors (RICS). In this article, you’ll read about the main points of the survey, and what is forecast for the UK property market in 2018.
Stamp duty changes are having very little impact on first-time buyers
The abolition of stamp duty for first-time buyers announced in November has had little effect. 15% more respondents reported a fall in enquiries from first-time buyers in December.
Only 12% of respondents thought that the stamp duty move would have a positive impact over the next 12 months, while two-thirds said it would have little impact if any. However, expectations are different in London, where more than a quarter of respondents think the abolition of stamp duty on first-time purchases would help market activity.
Supply of property for sale may improve
Supply of property for sale fell again in December, continuing the unbroken run of falls in new instructions to estate agents to 23 months. However, there could be a turnaround on the cards. Nearly a quarter of respondents reported that they undertook more appraisals in December when compared to last December. It follows November’s 15% increase.
Property prices could rise later this year
Expectations for property prices are improving, too. In November, respondents expecting a rise and those expecting a fall in prices were balanced. In December, the scales swung towards higher price expectations, with a positive balance of +8%. This points towards a slow rise in prices in the next few months, with prices rising more solidly later in the year.
Rental prices are expected to rise
Despite tenant demand falling again, rental prices are expected to rise in 2018. It is because the supply of rental properties is falling faster than demand – and the rate of fall in demand is slowing.
Property investment outlook is a regional story in 2018
The RICS survey once more highlights the issues of affordability in the UK property market. Even so, expectations for sales are positive in more than half the areas surveyed. The 12-month outlook for prices and sales is strongest in the North of England, Northern Ireland, and Scotland. This said London has recorded its first positive reading since June 2017, indicating that a pick-up in sales and prices in London may be just around the corner.
The abolition of stamp duty doesn’t look like it will have much effect on the property market, and certainly not increase activity in the way the government probably hoped. Indeed, when reporting on the impact of the Autumn Budget for property investors, we commented:
“No change from the current situation, except that first-time buyers should find it easier to buy a home. (However) it could be that sellers attempt to raise selling prices by a few percentage points, knowing that first-time buyers no longer need to pay stamp.”
Simon Rubinsohn, RICS Chief Economist, appears to agree when saying: “The initial feedback from the market doesn’t suggest that the change in the stamp duty regime announced in the Budget is going to have a material impact on activity. Indeed, the risk was always that a good portion of the benefit would be capitalised in the price, therefore limiting the benefit for the first-time buyer.”
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