Despite the assumption that we will leave the EU in 2020, the economic and political background to the housing market will be more robust over the next five years, even though some uncertainty will remain initially, according to a recent ‘Living with 2020 vision’ report on UK & London Residential Forecasts.
The UK economic growth will be slow at the beginning of 2020 before it gets better. A GDP growth of 1.6% per annum is expected in 2020 rising to 2.0% per annum in 2021 post-Brexit. This predicted GDP is likely to impact on housebuilding whereby government officials have estimated that any GDP growth under 2% will stifle the construction sector and limit the number of houses being built each year.
There will be a weak start in 2020 due to a slowdown of UK house price growth and transactions during 2019 but the housing market will get stronger as the UK house price growth will accelerate into 2021 and thereafter as economic and political doubt withers away – with 1% pa expected in 2020, will rise to 1.5% pa in 2021 and 4% pa in 2022.
While housing transactions will remain subdued in 2020 the number will slowly increase over the next few years. In 2020 there will 1.22m transactions rising to 1.36m in 2024.
Those regions who will perform best in house price growth are London, East of England, Yorkshire & The Humber, and North East although the West Midlands and Wales will underperform.
Meanwhile, the Government’s housing target of 300,000 additional homes each year looks like it will not be fulfilled as housing starts stand at 192,000 in 2020 rising to 210,000 in 2024 – due to housebuilder confidence in the medium-term outlook in new housebuilding.
According to the report there are six certainties which will shape the UK housing market over the next 5 years and beyond as follows:
- Housing will be top priority on a political agenda as 35 – 54 age cohort has the biggest housing worries. A quarter of the new-build homes in the UK have been purchased using Help to Buy – with 33% in London.
- Important population changes will happen where 62% of UK babies who are born to parents over the age of 30 compared with 50% two decades ago. People are delaying having children until later in life means that there is delay in a need for private family homes and in turn supports the growth of renting.
- There will be more demand for housing in towns and cities as there are an additional 200,000 more people living in the World’s cities per day and 2.5 million more people will live in the UK’s urban areas by 2024. Plus, ‘co-living’ is on the rise due to the need to densify housing.
- London will remain one of the fastest growing, dynamic and pioneering cities in the world as 100,000 rate of annual population growth is expected. The depth of talent due to strong universities and greater retention means London is ranked one of the world’s seven leading cities. Furthermore, technologically advanced industries such as RetailTech, Fintech and MedTech are flourishing in the capital city.
- New homes will need to ensure they consider the modern consumers reliance on smart technology. Research suggests Brits use 1.7 megabytes of data per second with this rising 65-fold over the next 15 years. New and existing homes will need modernising to cope with the pressure of future proofing for smart devices.
- Homes will need to meet the economic, environmental and social impact and consumer demands. As homes become zero carbon by 2030, developers will need to adapt to these changes.
Overall, although housing starts will take longer to embed until developers feel as though the political uncertainty subsides, a positive consumer sector fuelled by a strong jobs market and real wage growth should ensure that more people are able to afford to buy more new homes in the future.
