2017 is the year the British private rental sector starts to change

As happens at this time of year, the property industry in he UK is looking ahead to a new year and what it might hold, and the outlook is perhaps surprisingly positive, despite the decision to leave the European Union.

All the big players, from lenders, to estate agents to economists, are predicting that while there might be challenges ahead for property markets, home prices are unlikely to fall. Mind you, this is mainly due to there not being enough supply both in the sales and rental markets rather than anything else.

So, here’s looking ahead to some of the challenges and what they might mean for different sectors of the industry and the predictions and forecasts relating to them.

Although the Help-to-Buy mortgage guarantee scheme has now ended there are still government incentives for first-time buyers. Indeed, just this week the government announced where the first starter homes for young people will be built and given more detail of the plans.

But first-time buyers are still likely to face affordability issues despite interest rates being at their lowest level ever. It is unlikely that the Bank of England will rush to put up interest rates in a year when Brexit is finally launched with

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the triggering of Article 50, but a lot depends on public perception. Research has suggested that if prices are rising, first-time buyers think they cannot afford a home.

In its forecast, the Council of Mortgage Lenders said that Help-to-Buy schemes have resulted in an increase in the number of first-time buyers with a rise of 116% year on year since the low point of 2009. But what will happen when that support is withdrawn, which has to happen at some point? It also said that it is second steppers who are likely to struggle more with rising house prices.

It has been a turbulent time for the buy-to-let market with landlords who are expanding their portfolios now paying an extra 3% stamp duty additional home surcharge. They also now face tougher lending criteria for buy-to-let mortgages and from April tax changes will be introduced.

Landlords also face potential extra costs from the ban on letting agent fees that is expected to be introduced this year in England. It is widely expected that the cost will be passed onto tenants in the form of higher rents. Although it is worth pointing out that when such a ban was introduced in Scotland this didn’t happen.

Private landlords also face a threat from Build-to-Rent which has been thoroughly embraced by the government. The number of Build-to-Rent developments has increased massively, according to figures from the British Property Federation, with apartments aimed at young professional people set to take off in a big way. It is predicted that these

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lifestyle orientated, modern homes with leisure facilities, communal living and no hassle management will really take off in the next few years.

In the UK, the housing market is intrinsically linked to the economy and 2017 will be no different in that respect. Most forecasters, including the Bank of England, expect the economy to slow modestly as the government gets stuck into Brexit negotiations. Economists point out that the extent of house price growth will depend on development in the wider economy around which there is more uncertainty than usual because of Brexit.

But this hasn’t stopped experts predicting that prices will not fall. A few days ago the Nationwide predicted price growth of 2% in 2017 overall, although London is likely to be hit harder than other parts of the country as it has more international investor owners. And the Halifax is predicting price rises of between 1% and 4%.

My personal thoughts are that it will be a year that ushers in sea change, especially in the rental sector. It won’t happen overnight, but Build-to-Rent will become a new force in the UK housing market in coming years if young professional people embrace it as a lifestyle choice and turn away from home owning.

That will change the face of the private rented sector as we see the traditional Victorian flat conversion replaced by slick central city living.

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