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2020 Vision: A look at the year ahead

Tuesday, January 14, 2020

2020! The start of a new decade; one which will doubtless see many changes to the social and economic landscape of the UK including the property market. In December, a decisive general election result boosted economic confidence with the potential for some political certainty. With a majority government and Brexit now in sharp focus, leading behavioural economist Roger Martin-Fagg forecasts, “2020 will be a good year…. The best indicator will be monthly house sales. They are normally around 100,000 per month: we can expect 110,000 per month by April. There will be price recoveries in London and the South East and average selling prices will rise by 5% across the country.. The so called Boris Bounce will happen.” He is not often wrong, so watch this space!

Rightmove’s Commercial Director, Miles Shipside predicts, “The greater certainty afforded by a majority government gives an opportunity for a more active spring moving season, with some release of several years of pent-up demand. We’ve seen more motivated buyers coming to the market, as well as an uplift in potential sellers wanting their property valued”.

Mark Hayward, chief executive of the National Association of Estate Agents stated, “Despite the difficult year, the UK property market remains a strong sector overall.. We hope for a more certain outlook and some stability in 2020.. A clear government strategy is needed to tackle key issues such as Stamp Duty.”

Residential sales rose by 1.9% year on year in November according to the latest HMRC data. Property industry analysts predict that house prices will rise gently in 2020 but there are plenty of variables, not least whether there will be a Brexit deal by the end of the year. The Royal Institution of Chartered Surveyors predicts a rise of 2.0% in prices nationally and suggests that a sensible approach from vendors will secure a sale.

On the lettings side, legislation still dominates the headlines and The Queen’s Speech in December confirmed that a Renters Reform Bill will be introduced to protect tenants rights. This will remove Section 21 from the Housing Act while strengthening the rights of landlords who need to gain possession of their property when they have a valid reason to do so. The new Bill will also introduce a new lifetime deposit “so that tenants don’t need to save for a new deposit every time they move house”.

Other measures due to become law over the next five years include greater rights to redress for tenants if their homes fall below minimum quality and safety standards and reforms to leaseholds and shared ownership. More than ever, it is vital for landlords to understand the regulations and ensure that they are adhering to the law or enlist the assistance of a lettings agent to keep everything on track.

Over the last decade, as complex legislation has increasingly been passed onto landlords, many have opted to leave the sector. This has restricted supply of available properties and tenants are now faced with less choice and higher rents as a result. Looking ahead, it is hoped that the Government will see the importance of increasing supply for tenants and not penalise those landlords who provide high quality, affordable housing.

From April 1, all existing tenancies will need to fall in line with the existing Minimum Energy Efficiency Standards law introduced in 2018, whereby landlords or their agents whose rental property has an F or G rating will no longer be able to legally let them out. Landlords will be expected to pay up to £3,500 towards energy efficiency improvement works. However, if work will cost more than that landlords should seek expert advice and perhaps apply for an exemption.

Recent tax and Stamp Duty changes have forced landlords to look for efficient ways to structure their business and more competitive mortgage products. Mortgage costs in the Buy to Let (BTL) market have fallen recently, however data shows that the cost of a two-year fixed BTL product is still almost 30% higher than the same product for an owner occupier’s mortgage. 2020 will probably see more investors going into diverse and complicated portfolios in order to improve their bottom line and specialist lenders are already tailoring products to match their complex requirements.

Many landlords will be considering their options; being a landlord can still provide a reasonable income and a healthy pension if viewed as a longer term investment option. However, 45% of landlords cited Stamp Duty Levy on additional properties as a deterrent to further investment in property. There are calls for the government to scrap the Stamp Duty levy to encourage landlords to provide homes which add to the net supply of housing. With a new government and a Budget due, there may be a shift in policy to one that supports investment in the private rented sector as demand continues to rise.

In spite of all the challenges that landlords face, the private rented sector remains a successful business opportunity for landlords. Southern regions recorded strong rental growth this year at 4.1% year on year, driven by an 11.7% decrease in the number of homes available to rent in the first 11 months of 2019, but there are now signs that investors are return to the market. BTL remortgaging was at the second highest level for the year in October 2019. The South East is still an attractive option for property investors particularly if they seek expert advice on which locations and property type to invest in.

Whatever your plans, 2020 promises to be a dynamic year for the property market. If you’re selling or letting, it’s important to get an accurate, current market appraisal of your property to enable you to make informed decisions. With over a century of expertise in the local property market, Frosts can advise you on your best options and give you plenty to look forward to as you get moving!