A recent study about the UK property market outlook by PwC, which took into account the impact of Brexit, said, “Since the millennium, the share of 20-39 year olds who rent privately has more than doubled from 20% to 50% and we anticipate that this rise will continue.”
This UK trend clearly applies to London where average earnings are likely to fail to keep pace with property market growth over the longer term. This will make it harder for many people to save up to buy their own homes. While London house prices are stuttering in the near term due to uncertainties over Brexit, the longer term outlook seems to be robust due to a shortage of supply relative to demand. Demographic projections point to continuing population growth in the UK capital in the coming years, intensifying demand for somewhere to live. Although it will typically take many years for a “generation renter”, on average, to be able to buy their first home, PwC says that Brexit may have brought that dream a step closer.
“The average generation rent households starting to save for a first home in 2016 without family assistance, are estimated to need to save for around 19 years to afford their first home,” it said. “Without Brexit we estimate this would have been around 21 years, so there is a slight improvement.”
These figures are clouded by uncertainties, such as risks of unemployment due to the economic shock associated with Brexit, fears over real earnings growth as inflation picks up, and the impact of interest rates, which will rise from historically low levels at some point.
In the near term, increased tax demands on buy-to-let landlords, combined with uncertainty over the economic future due to Brexit, seem to be increasing the supply of rental properties in London.
“I suspect there may be a fair amount of property coming back to the lettings market that isn’t selling and this will mean more properties on the market than tenants looking,” said Nicole Chamberland, owner of Putney-based estate agent Chamberland Residential.
“I believe the future lettings market will be buoyant and busy, but with rents staying the same and/or potentially having a slight decrease over rents from last year due to the extra property being available and more choice. Since I started in 2001, the rental market has always been busy. Rents may have gone up and down considerably at times, but there has always been demand and that’s what I love about the lettings market in London,” she said.
Taking into consideration the difficulty of younger people to step onto the housing ladder, Build to Rent could be a positive step to ensure delivery of new, high quality homes to the increasingly high portion of the population who will be renting in London in future.
“At Chamberland Residential we take pride in knowing our market and what’s happening here in our town, not just London as a whole because, believe it or not, it often differs from one end of the city to the other. We take into consideration what’s really happening out there and we adjust for it. That often means managing expectations for applicants and for our landlords so there aren’t any surprises.”
About the Blogger: David Brough has been a buy-to-let investor for over 20 years, originally letting out properties in London while he was working as a Reuters foreign correspondent. David’s Blogs on the Chamberland Residential website look at some of the major issues in the lettings and sales markets, as well as the market outlook. Apart from his interests in property, David is Editor of digital jewellery trade magazine Jewellery Outlook, and of interior design website ChelseaCross.com. He can be reached at: firstname.lastname@example.org