Predictions 2020

Thoughts from our CEO, John Goodall

Before the general election, Boris predicted a baby boom once Brexit was done. I’m not sure about that boom although I suspect the general election result bodes well for the economy in 2020 and beyond.

Over the last 12 months, the UK economy has seen extremely strong levels of job creation and inflation has been kept in check, although economic growth has been anemic. Growth has been slowing around the world - particularly in China and Germany and this will obviously have an impact on the UK. However, there are several factors specific to the UK that have been holding us back, particularly political uncertainty and productivity. The new Conservative government’s focus on infrastructure and education is welcome and should, in theory at least, help to boost productivity in the long-term but is unlikely to have any meaningful impact in the short-term. Even the expected loosening of the purse strings and ending of austerity are unlikely to make a real difference until at least 2021. As fiscal changes take time to work through the system and lead to more money in people's wallets.

The big difference is that political uncertainty has significantly reduced. We don’t know the exact shape of any trade deal that can be negotiated by the end of 2020, or even if anything can be done within 12 months, and so uncertainty has not been removed altogether. My guess is that some form of basic trade deal will be achievable in that time period, with a more comprehensive deal taking an additional year or two. The EU is now sitting across the table from a PM who is able to get any deal negotiated through parliament, and the UK is now more politically stable than any of its EU counterparts. An additional referendum on Scotland's independence looks likely at some point during 2020. However, for the first time since 2010, we have a government with a working majority and the threat of high tax, anti-business socialism has gone for the foreseeable future. This will give the UK economy a welcome boost over the first 6 months of the year - I think that we will see increased investment in the UK economy from overseas and we are already seeing the pound strengthen.

What does this mean for BTL? Well - the threat of increased property taxes and rent controls have dissipated over the last couple of years. We have seen potential buyers of property sitting on the side-lines, waiting to see what happens. I expect that we will now see professional landlords start to further invest in additional property. If the UK government takes a pragmatic approach on immigration and the employment market remains strong, then the demand side will remain strong, which will further reassure property investors. The outlook for the UK economy and the property sector is now better than it has been at any time since the referendum. In many respects, not a huge amount has changed, however, confidence will return to the market and that is a crucial ingredient for the economy to prosper.

Since the stamp duty increase in April 2016, we have seen the BTL purchase mortgage market remain subdued at about £9-10bn per annum. I expect 2020 to be the year that we see a proper recovery in the purchase market; I forecast that we will see it grow to around £12bn. It could turn out to be a busy year for brokers and lenders focussed on the professional BTL market.

Best wishes
John Goodall, CEO