Housing dilemma? l Vesta blog

Housing dilemma?

December 3, 2019

As you will be well aware, the UK property market has continued to face significant headwinds over the past couple of years, which has subdued house price growth (including negative growth in certain parts of the UK, notably London and parts of the South East) and has resulted in fewer property transactions.

In a period of ultra-low mortgage interest rates this might be somewhat surprising.  As always there is no one reason driving this however broader economic trends, market confidence, Brexit, the current political uncertainty plus the upcoming general election are all playing a part.

In addition to the above there are a number of government factors which are creating some property investment apathy:

  • Increased taxes on landlords – Section 24 which has resulted in the loss of tax relief on mortgage interest costs for additional properties bought in the landlord’s own name.
  • Increased regulation and licencing – whilst not always a bad thing when introduced correctly this increases costs for landlords and ultimately tenants.
  • Lenders being more cautious, demanding lower LTVs and preferring more experienced landlords.
  • Mr Corbyn calling all landlords ‘dodgy’ does not paint a positive picture for new investors.
  • Inflated initial purchase prices for FTB ‘Help to Buy’ properties have created a housing bubble impacting these properties and FTBs who are looking to sell them are finding that a lack of capital growth is preventing them from being able to upgrade without taking a financial hit.

Surprisingly, neither the Conservatives nor Labour parties’ manifestos provide real solutions to much of the above, even though the RLA recently published some research that indicated landlords’ votes were pivotal in the election battle.

 Housing will always be a major issue for government and real estate has the potential to continue to be a great investment.  Property investment offers several advantages over other investment types and generates continued ongoing income.

 With a growing population and increasing house prices, there is no doubt that demand for rental property will continue to grow as will rental levels. 

The occupiers of Number 10 really should invest in all aspects of the property market and that includes supporting people who want to buy homes, tenants who want affordable homes to rent and landlords who want to invest in quality homes to offer for rent.

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