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Property investment trends for 2016

29th March 2016 Print
Apartments

Much discussion on the property market at the start of each year tends to centre on whether and where house prices will rise and fall. However, both the UK and wider international property markets will likely have many more factors to think about in 2016. 

Birmingham and Berlin steal a march on London 

London may still be Europe's largest real estate market and a magnet for property investors of almost all types, but a recent Emerging Trends in Real Estate report placed it only 15th in a list of the leading cities for investment prospects in 2016

Insufficiently high yields in the English capital after years of booming prices have been blamed for its slide down the order, which has enabled the likes of Berlin, Hamburg, Dublin, Madrid and Copenhagen to grab the eyes of especially savvy investors. 

The German capital was tipped as an investment prospect on account of its "young population and... growing reputation as a technology centre, as well as the land available for development", while Birmingham occupied sixth place in the list for the second year in a row. 

In the words of one investor, "I think it is finally proven that Birmingham is attracting employees and employers from London. At several buildings in Birmingham which we own, the tenants have moved people there because it is cheaper." 

Landlords coming under pressure

Another property market trend that has become apparent in 2016 - in the UK at least - is an increased emphasis on buying homes to live in rather than as a buy-to-let investment. 

That can be largely attributed to moves by the current Conservative government to not only hike stamp duty, but also remove certain landlord tax privileges and require them to check that their tenants have the right to reside in the UK - the latter possibly one onerous obligation too many for some prospective or current buy-to-letters. 

Landlords failing to comply with the latter requirement risk a £3,000 fine. Furthermore, with the homeownership rate in England having stabilised at 64% according to the 2014/15 English Housing Survey - after over a decade of decline - it's perhaps unsurprising that the Council of Mortgage Lenders (CML) has predicted a steep fall in the number of new loans being granted to landlords. 

Whereas buy-to-let investors secured 116,000 mortgages in 2015, that figure is set to drop to a mere 90,000 next year, indicating that it may be residential rather than buy-to-let investment expertise that is in particular demand for the remainder of this year. 

House prices will continue to escalate 

Indeed, now is an interesting time for mortgages, amid predictions that the Bank of England will finally soon edge up its interest rates after seven years at a record low of 0.5%. Such a low Bank rate has long equated to very affordable mortgages by historical standards, although that surely won't be the case forever. 

One other trend that property market observers do seem sure will be a characteristic of 2016, is ever-higher house prices. Property commentator Henry Pryor, Simon Rubinsohn of the Royal Institution of Chartered Surveyors (RICS) and Halifax's Martin Ellis are just some of the industry observers to have anticipated price rises of between 2% and 6% over the coming year, along with continued healthy UK property sales. 

How close are such observers to the truth of how the UK property market will shape up for the rest of 2016? That remains to be seen, but it will certainly be a question on the lips of many a property market investor and commentator for many months to come.

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