Predicted growth for the UK sales market in 2010, is 3-5%. Prime London properties will continue to lead the way and remain the hub of growth. Despite this affirmation for UK sales, there are still large concerns which could halt progress such as the expected increase in interest rates. Furthermore, the anxiety around the election and possible taxation later on in the year could potentially have unseen impact on the market.
One factor which has influenced the predicted growth is the consistent imbalance of supply and demand. As we progress through 2010, this is likely to remain, although as vendors become aware that that they can achieve a profitable and quick sale, there is likely to be uplift in UK property sales stock.
Buyer numbers are predicted to return to 2007/8 levels. This is based on the key drivers that helped fuelled the market in 2009; where
properties for rent enjoyed lower interest rates, greater economic stability and a weak pound.
Although early in 2009, there were drops in the UK house prices, there was an apparent change in Q2. It has been suggested that the 4.3% increase in house prices started the upward theme. In addition, whilst monthly fluctuations have been moderate, according to the Land Registry, the steady increase has been consistent since May 2009.
With regards to the rental market, it will experience a sluggish start in 2010 and overall there is little growth predicted. However, the market will be less erratic than 2009. The previous 18 months have been a challenging time for landlords, but as the market stabilises, those who have managed to remain steadfast against the economical storm will start to experience the benefits.
Once such benefit is that as the economy starts to recover, we should see a positive impact on the corporate rental market. Businesses will re-gain confidence and start to re-locate staff and re-invest in their organisations. Although it is to be expected that these companies will be prudent with their reduced budgets and therefore have lower relocation packages on offer.
Even though we have seen an improvement in the economy, consumer confidence remains fragile, and although applicant levels remain buoyant we are not yet seeing applicants increase their budgets. In reality, it is taking some tenants longer to find suitable accommodation due to their tight budgets.
Undoubtedly the sales market has a huge impact on lettings. In 2009, we saw accidental landlords returning with
properties for sale to the market and therefore bringing rental stock levels down. If the sales market continues to strengthen, this impact is likely to continue into 2010. If stock levels remain consistently low a slight increase in rents could occur. Although this will not be until demand traditionally increases (Q2 and beyond) and considerable rent rises will be unlikely due to the frugal budgets of tenants.
The fact that we saw a high proportion of tenants request rent reductions at the point of renewal in 2009 is in correlation with the tenants budgets. In fact early in 2009, nearly 30% of tenancies were renewing with a decrease in rent of at least 10%. However, by November, this had changed with 10% of tenancies achieving rent increases. At the end of 2009, the average rent increase stood at 4.5%.
Finally, for the investor in the UK lettings market, 2010 will be governed by borrowing ability. During 2009, even the professional investors with larger steadfast portfolios found it a challenge to acquire funding to further invest in the market. In addition to this, rising interest rates would have a considerable impact on the investor. During 2009, existing investors enjoyed low rates and a rise in rates in 2010 will undoubtedly have an impact on the rental market.
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