As an asset class, property is renowned for its historic ability to deliver secure and stable returns in times of financial volatility. Testament to this has been the performance of the UK property market in the months following the Brexit announcement. Contrary to initial speculation that demand for real estate would stagnate as a consequence of the UK’s forthcoming withdrawal from the EU, investor demand for real estate has remained consistently strong. As house prices continue to rise, it is estimated that the average UK house price could grow by as much as 56% over the next decade. Moreover, a new research poll has found that 71% of prospective homebuyers are not considering Brexit when planning their next house purchase.
While the performance of UK property is certainly impressive, it is important to understand the underlying factors propelling the market forward. Over the past decade, domestic and foreign demand for UK real estate has outweighed the total volume of housing stock available. To ease market pressure, the Government has pledged to increase the number of available properties by supporting the construction of new-builds, in an attempt to support the next-generation of homebuyers and those seeking buy-to-let investment opportunities. The Conservative Party has set a target of adding one million new homes to the property market by 2020. This is an important step forward, but any future housing strategy must do more to ensure that the housing supply is strengthened by way of a long-term strategy.
MFS recently commissioned a body of national research among 2,000 UK adults to uncover the sentiments of Brits towards the full range of properties available on the market. The results were illuminating – 81% of UK adults are unenthused by the prospect of living in a new-build house. Moreover, when questioned about the future direction of government policy towards housing, 79% of UK adults think the Conservative Government should focus more on supporting the refurbishment of run-down properties to meet housing demand. This resounding figure demonstrates the need for Westminster to recognise the popularity of traditional housing over new-builds, and introduce new initiatives so that far more vacant properties are made available on the market.
There is tremendous value locked in a variety of properties across the nation – it was recently reported that more than 200,000 homes in England with a total value of £43 billion had been left vacant for at least six months in 2016. Taking into account UK homebuyers’ overwhelmingly preference for traditional properties over new-build houses, these vacant homes offer tremendous untapped potential. For this reason, the Government must consider the positive impact refurbishment and renovation projects can have in enabling previously uninhabitable homes to be added to the market. While this won’t independently resolve the current housing shortage, such measures can only serve to benefit the interests of prospective homebuyers across the country.
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Paresh Raja, CEO of Market Financial Solutions