Housing stock shortage colours My Home Move's 2016 predictions

The housing shortage facing the UK is set to be the driving force behind market changes in 2016 according to Doug Crawford, CEO at My Home Move.

Doug believes government targets on affordable housing could well miss the mark both on volume and on price, and Doug also predicts stamp duty reforms could well lead to a “turbo charging” of the market in the coming months.

Doug said: “A lack of housing supply, low interest rates and greater lending availability will see property prices remain high during 2016. We expect to see UK property prices rise by between 6% – 10% over the year, meaning the average property price could hit a high of £315,000 for the first time – eleven times the average salary.

“Alongside this we’re predicting housing transactions to grow at a conservative 4.6%, mainly driven by the new build market, as the dearth of housing stock continues to dictate.

“Despite the Government’s pledge to deliver 400,000 new homes by the end of the decade, 200,000 of which will be affordable (capped at £250,000 outside of London and £450,000 inside the capital) 2 in 3 people believe these will still be too expensive if priced over £120,000.

“This means that for those who don’t have access to a gifted deposit, getting on the property ladder is going to be a real struggle. Throughout 2016 we expect to see 40,000 new homes built, only 50% of the Government’s annual target of 80,000, but just how many of these end up in the hands of first-time buyers is still up for discussion.

“The cost of an average starter home increased by 3.8% to hit a record high of £215,000 in 2015 and as prices are not expected to fall, it’s a firm indication that the ‘Bank of Mum and Dad’ will be raided again. This, coupled with changes to the pension system brought in last April, now means the Bank of Mum, Dad and Grandparents has additional capital available to help fund the first-time buyer market.”

The Government’s new Help-to-Buy ISA, launched on 1st December this year enables savers to earn a 25% bonus on savings towards a new home. But limits on the product mean it’s only possible to save £200 a month, when many savers will look to save significantly more towards a deposit, with the average property now costing more than £300,000.

Doug said: “Despite the good intentions of the new Help-to-Buy ISA, we fear it may do nothing to revitalise the first-time buyer market for at least three years, due to the cap on the amount people can save.

“As such we expect to see conservative market growth (4.6%), an increase in 95% LTV mortgage products from lenders and an announcement that the ‘Help to Buy’ mortgage guarantee scheme will continue past its deadline of 2016, until FTB activity picks up.

“We expect the introduction of a 3% Stamp Duty levy for Buy-to-Let investors and second homeowners, announced during the Autumn Statement, will turbo-charge the housing market over the next four months as people race to beat the deadline before the changes bite in April. This will inevitably push up property prices in the short term, especially in locations popular with Buy-to-Let investors, such as London.

“However, this measure will change the economics for investors in the long-term. Currently the Buy-to-Let market accounts for 14% of property transactions annually and we wouldn’t be surprised to see this figure fall over the second half of 2016; resulting in an overall market slowdown.”

Today's Conveyancer