There is no doubt that the property market today is a completely different landscape to what it was 10 years ago following the financial crash of 2008 and the Brexit vote in 2016. As we head into a new decade, we look back on the past 10 years and see how the sector has evolved, and how past performance may be informing the future.
Prior to the financial crash of 2008, the UK property market was buoyant and stable for investors leading to a boom in the buy-to-let market. House prices were increasing rapidly by around 95% in just eight years according to Nationwide. However, what goes up, must come down and the property market soon came crashing down to earth.
The pound dropped to its lowest value in 40 years and UK house prices fell by about 16%. This led to an upsurge in international investors who spotted an opportunity to grow a large portfolio in the London property market, meaning there was a stock shortage which still afflicts the market heading into the new decade.
Following the financial crisis London quickly became an incredibly expensive market for both property prices and rental prices, with Zoopla estimating that prices grew by about 57%. Buyers and renters quickly started to spread out into commuter towns that allowed them access to the capital but with the added benefit of an affordable lifestyle. At the same time, investors saw opportunity further afield in areas such as Birmingham and Manchester where the initial property cost was lower, but still delivered a high rental yield, leading to these regional cores expanding.
Also expanding this past decade has been ‘generation rent’. The private rented sector is set to overtake homeowners by 2039 and cover 1 in 4 homes by next year. Although interest rates are at a historic low, the mortgage regulations that were introduced in 2014 mean that buyers can no longer borrow the amount they used to and are effectively priced out of the housing market.
As I’m sure you’ve noticed (who can avoid it) Brexit well and truly dominated the final years of the decade, shrouding us in a cloak of insecurity. However, although we have recently experienced a generally slower rate of growth, overall the property market has overperformed following the referendum. The uncertainty does not seem to have put off international investors, with over a third still investing in the UK market according to the SevenCapital Brexit Survey. Being able to stay relatively stable through such a large-scale political event shows the strength of our property market, with several cities even recording a price-growth post Brexit-vote.
Following the most recent general election in December, the outlook for the UK property market looks stable, most likely due to the finality of the result which brings an end to the uncertainty that has clouded the past few years.
Looking ahead to 2020, the Royal Institute of chartered Surveyors expect a rise of 2% in house prices and 2.5% in rental prices. Prior to the referendum the average rise was 8%. This decline, along with Brexit could be down to the undersupply of properties we are facing currently. The UK need to accelerate house building in order to meet the demand and only modern methods of construction will be able to enable this.
As we enter the new decade, people may have to start thinking differently about real estate, whether it be building vertically up, or even underground, to ensure the rising population can all be accommodated for in an already competitive market. Huge advancements we have recently seen in property technology may mean come next decade the property market will have been completely revolutionised, and it will be exciting to see where it takes us.