Challenges for housing sector will intensify in 2016

The London property market grabbed the limelight the whole of 2015 and the situation appears no different this year with several challenges in front of the stakeholders of housing while the price inflation continues.

It is evident that 2016 will remain the year of challenges for the housing sector in London, especially when the demand as well as prices is predicted for another sharp increase. Unless, these challenges are addressed on a priority basis for long-term by all stakeholders concerned, affordable housing will become a mirage for the people of London.

Already, it has been forecasted that the increase in the house prices could range between 6% and 8% depending on any possible interventions from the government, including the interest rate rise, in 2016. However, we do not foresee any major rise in the interest rate and it means a positive impact on the housing sector in the UK. In case there is any unexpected increase in the interest rate, it could negatively impact the housing sector, and contract the property market further, as housing becomes even more unaffordable.

The demand-supply gap is expected to continue to widen throughout 2016, as fewer projects and developments have been announced. The pace of construction of homes in the already announced projects too is not at the expected level owing to various reasons. This will automatically pressurize the pricing margin and thereby further increase the valuation of a property. A new mechanism has to be brought into the system to speed up the pace of construction so that the housing projects are completed without any cost escalation.

There are several projects earmarked for rejuvenation in London, but there is a need for evolving better public-private-partnership (PPP) models to create a win-win situation for all stakeholders involved. For a long period of time, a negative sentiment prevailed among the public and local authorities against such PPP models for the reason that land hoarding situations were being created unknowingly. However, it is time that the PPP models were revived to meet the social housing needs as well as to strengthen the economy of the local communities.

London will continue to remain the preferred destination for investments in the property market for the overseas investors. The city continues to offer one of the highest returns on investments anywhere on the globe. As a consequence, in 2016 too, we will see enhanced interest from overseas investors, particularly those from developing Asian nations, in the London property market.

A vibrant economy and better wages in 2016 could help the property market, but are unlikely to make any significant impact in the near-term. The buyer sentiment in London, especially for Londoners at present is not positive and should be tackled at the grassroots level itself. If we do not attempt a paradigm shift to realign the business to meet the growing demand for housing, 2016 is likely to be a repetition of 2015.