Estate Agency boss has recently claimed that the UK Property Market has “peaked.” Is this true?
Paul Smith, an Estate Agency boss within the UK property market, has raised alarms after warning that there is now “trouble in paradise” as the market is set for an “implosion”. His company operates some of the biggest Estate Agencies, including Haart, Spicer McColl, and Darlows.
He has warned that the market cannot maintain sustainability amidst new highs. He warned that the average house price in some areas is now far out of reach of many average earners. Indeed, the average cost of a home in the UK is at a new high of £234,000 – which is nine times the average income. This asset price to income ratio has also reached a new high in modern times.
Smith has seen a drop in buyer demand – 46% in one month – and believes this is the beginning of a longer trend as the nation becomes unable to keep up with asset price rises. These gloomy predictions support the evidence provided from HMRC which showed a dramatic collapse in the number of house sales in April after a boom in March to beat stamp duty.
Of course, much of the reduced demand is politically related rather than economic, which has to be acknowledged. Firstly, the government implementation on stamp duty and general attack on Buy-to-Let within the UK property market has meant that many investors have been less willing to invest. Secondly, the potential Brexit means that many investors are uncertain about future options, and are therefore preferring to wait to find out the political decision. As such, it does not mean there is not demand, it is just that there is also some uncertainty.
The traditional channels of property investment may be losing out, but other alternative channels are gaining newly found prominence. Schemes such as the Build-to-Rent are receiving attention from construction companies ad property developers as a new way to profit from the growth of the rental market. The government are assisting private sector building schemes, so investors in the UK property market are beginning to shift from Buy-to-Let to Build-to-Rent.
To state that the UK property market is crumbling at our feet would be outright fearmongering. While Smith and others may have worries about the property market, the past few months have shown that instead of being a bubble, the property is actually remarkably resilient. In the face of taxes, reduced capital relief, and political uncertainty, demand has still stayed strong, regardless of a small post-stamp duty tumble.