Predictions for 2016

Director of Commercial and Franchising, Dorian Gonsalves has outlined some predictions for the 2016 marketplace, starting with publicly urging the government to drastically increase social housing and help to relieve the pressure that's on the PRS.

Our Director of Commercial and Franchising, Dorian Gonsalves has outlined some predictions for the 2016 marketplace, starting with publicly urging the government to drastically increase social housing and help to relieve the pressure that is put on the Private Rental Sector.

Through 2015 the Bank of England and the Government made an effort to curb expanding house prices, this was done by restricting the amount of lending to 4.5 times income as well as limiting the growth of Buy-to-Let with new tax rises and a hike in stamp duty.

Dorian explains ‘There is already a housing shortage, and if landlords continue to have second thoughts about buying properties in 2016 this will further reduce the number of rental properties that are desperately needed’ he continues ‘Increased government interference in the Buy-to-Let market will put a real squeeze on the supply of property in the rental market in 2016 and beyond.’

We witnessed a shift in emphasis away from renting in 2015 with a new drive towards raising the number of properties available for ownership, putting pressure on to the rental marketplace. When examining likely rental increases, our analysis has projected that whilst increased pressure on the market may drive up rents in some areas, even in areas where demand exceeded supply rent can only increase in line with wages. Dorian confirms ‘we are forecasting modest average rental increases of 3%, but should the shortage of property available to rent reach crisis point rents are likely to rise further.’

From the analysis we have carried out using our rental index, 2016 looks as though it is set to be an economically similar year to 2015. Predictions from The Centre of Economics and Business Research show inflation remaining below 2% until 2017, The British Chambers of Commerce also predicting a total earnings growth of 4% in 2016, rising to 4.5% in 2017. With this in mind, Dorian expresses concern ‘that Government schemes such as Help to Buy are very useful for those tenants who want to buy a property but will not help thousands of tenants across the country who choose not to buy or a not in a position to buy…these thousands of tenants now seem to be a forgotten sector of the housing market.’

Some analysts are predicting a 50% rise in house prices over the next decade, in our research we have predicted to see a rise of at least 5% in 2016 with this set to accelerate over the next four to five years. ‘In my view, whipping the public up into a home-buying frenzy is not very sensible, as prices rise when the population feels they need to acquire a ‘must have’ commodity. If the opposite happens and prices stagnate, builders will not build’ Dorian says.

The Government have pledged to build 400,000 new homes over the next 5 years, when London is taken out of the equation this is an estimate of 200 new affordable homes in each town or city across the UK. Dorian remains hopeful, confirming ‘as an investment landlord myself, I have done some number crunching and am convinced that Buy-to-Let is still profitable. This may not be the case for very highly geared landlords in low yield areas, but it certainly is for most of the areas that Belvoir operates in, which are usually landlords with one to three properties and accidental landlords.’  

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