Property price growth is likely to be subdued in London with bigger regional cities in the UK expected to outperform the capital city, according to a new analysis report.
Overall residential price growth of 0.5% is forecast for the UK, rising to 1% in London but the prime property market in the capital is set to be flat, according to the report from real estate advisors JLL.
Very little house price growth is expected over the year as the country absorbs Brexit uncertainty and knock-on impacts to consumer price inflation and affordability, which is already stretched, the report suggests.
But it adds that there will be hotspots such as Manchester, Edinburgh and Birmingham and points out that Manchester city centre has experienced weak supply levels over the past few years, pushing up prices and rents by around 15% and 11% respectively in 2016 with little relief expected in 2017.
In Edinburgh, the suburban family homes markets are all seeing strong demand while Build to Rent in the city centre and towards Leith is taking shape. Birmingham, beneficiary of the first big Housing Growth Fund investment into 2,000 new homes, is also finding renewed attention after having been overlooked by large scale residential investors in favour of Manchester coming out of the downturn.
The report also predicts that new build starts will hold at just below 2016 levels across the UK as a whole but will fall dramatically in London even although need is most acute in the city.
‘Legislative changes, such as stamp duty, and the uncertainty around Brexit have led to weaker investment demand from overseas as well as domestic buyers. Alongside an overstretched owner occupier market, this will keep a lid on price pressure,’ said Andrew Frost, leader director of UK residential at JLL.
‘At the same time, build costs will see significant inflation as the devalued pound sterling hits imports while the Mayor of London has continued to push for bigger affordable housing contributions. As a result, in contrast with the nearly 24,000 homes built in London during 2015, 2017 levels are expected to fall back closer to 16,000,’ he explained.
‘The challenges for the Mayor to use public land, planning and investment to stimulate supply are steep. There is much to be encouraged by so early on in his tenure, but his oft-used phrase of it’s a marathon, not a sprint is only too true. A strong, stable political backdrop for housing policy aligned with the creation of the new London Plan and Government White Paper will be an important handrail for an industry in need of guidance,’ he added.
The report says that 2017 will be the year in which innovative techniques begin to be used much more widely in residential construction and off site construction will be at the forefront of this. Indeed, the first large scale factory for new homes in the UK that will come online in 2017.
‘With a shrinking and destabilised workforce, the need to go off-site will become ever more critical and the first big steps will take place in 2017. Aligned with this shift, and perhaps just as important, is the need for greater adoption of Building Information Modelling or BIM’ Frost pointed out.
A standard requirement for public sector construction, BIM has not been widely adopted in the private sector, other than in 3-D modelling at design stage. However, the report says that BIM can produce a level of cost certainty that is not possible with traditional build methods as well as even more significant savings through more accurate and standardised procurement and post completion feedback.