Posted: Dec 24, 2015
Continuing our new monthly column, experts share their views on property prices in the UK and overseas.
What can we expect for house prices around the world in 2016? Leading industry experts offer their insights, predictions and local knowledge. Some agents focus on Italy or Ibiza, while others look further afield to remote and romantic destinations from Brazil to Barbados. But here is a snapshot of house price forecasts for the year ahead.
1. Mallorca, Spain
“There has been a shift in perception regarding Mallorca in the past five years in terms of quality, style and sophistication, the island certainly has a lot more to offer buyers. Mallorca is easily accessible from all of Europe and most parts of the world, it’s a safe haven with a warm, sunny climate and a sophisticated infrastructure.
The demand for quality property throughout the island this year has in some cases outweighed supply and there has been a surge in demand for off plan developments. In 2016 a limited selection of exciting new projects will be launched around the island in a frontline location in the South West, on the South Coast and in the exclusive residential area of Son Vida, to name a few. The trend in new luxury residential projects is to combine premium real estate with superior service which has, until now, only been available in the finest hotels.
The demand for quality property throughout the island this year has in some cases outweighed supply and there has been a surge in demand for off plan developments. In 2016 a limited selection of exciting new projects will be launched around the island in a frontline location in the South West, on the South Coast and in the exclusive residential area of Son Vida, to name a few. The trend in new luxury residential projects is to combine premium real estate with superior service which has, until now, only been available in the finest hotels.
However, strict building regulations mean that the island’s real estate market retains a healthy balance and this is why we are seeing initial price increases of 5-10 per cent and more for top locations.”
2. London, United Kingdom
“We’re predicting a solid start to 2016, as many buy-to-let investors rush to purchase before the Stamp Duty Land Tax (SDLT) reforms take effect in Q2 2016. Despite predictions of no price growth, we may just see some price movement as the market heats up and turns back in favour of the seller, if only for the first three months. Looking ahead to the rest of the year, we foresee further caution from potential buyers, especially at the top-end, with the biggest deals likely going to those trading-up or internationals purchasing their first London home.
“On the whole London is still an attractive market and will continue to be active. A continued thawing of relations between the UK and Russia, as well as predictions of a strengthened Rouble will see Russians coming back to prominence. Chinese and Middle Eastern buyers are also becoming more active as their economies strengthen.”
“While the overall market will move steadily forward, there will be regional variations that will see London and the South East as the strongest performing markets for price growth. In contrast Prime London will demonstrate the weakest price growth of any submarket as the effects of a rise in Stamp Duty continue to dominate.
“Demand for rental accommodation has accelerated quickly over the past decade and there is little to suggest this trend will run out of steam anytime soon. With supply constraints possible in the medium-term, we believe there will be additional upward pressures on rents over the next five years. Significantly, the number of rented households has escalated from just 2.3m, or 11 per cent of all households, ten years ago to 4.4m, or 19.4 per cent of all households today.”
“Current trends also suggest that the number and proportion of private renters are set to rise further in the medium-term, driven largely by housing unaffordability and onerous deposits. Government initiatives such as 20 per cent discounted starter homes offer some hope for would-be young homebuyers, but this is unlikely to reverse, or even notably alter the strong upward march of the private rented sector, which is already the most active part of the domestic housing market.”
3. Ibiza, Spain
“Above all market stability and the superb quality of life attract investors here. Clients who are looking to acquire a luxury property on Ibiza for a moderate price, are too late.”
“I anticipate that the upward price curve and positive market development will continue in 2016 and that prices for premium estates in sought after locations, will increase further in the long term. The high demand from overseas is centred on an increasingly limited supply of property around the island’s best locations and this brings market stability together with sustained growth value.”
4. Brazil
“Despite the economic and governmental issues currently in Brazil, albeit on a temporary basis, real estate investment still presents a very real opportunity for those willing to consider the broader picture (medium to long-term view). In fact, we strongly believe that now is a great time to invest in Brazilian property. This is due to both lower property prices and significantly undervalued Brazilian real estate, which for overseas property investors creates a perfect and unique investment opportunity.
“Brazil has enjoyed a long period of strong economic and real estate growth and despite the current, short-term economy downturn, Brazilian economy maintains an attractive environment for international investment. Brazil is one of the eight largest economies in the world and with its growing middle class and developing consumer society, the country has a great potential for further growth.
“There is significant interest in Brazil coming from overseas investors. In particular, over the last 11 years, foreign direct investment (FDI) figures showed a dramatic surge amounting to a 516 per cent increase in the period from 2003 to 2014, with FDI amounting to 62.4 billion USD in 2014, surely helped by the FIFA World Cup that year. And that’s just the start, the global investments and property prices will increase, with the Rio 2016 Olympic.
“Overseas buyers have realised the potential in the Brazilian property industry and it is now a highly attractive prospect for foreign investment, enhancing its position as a competitive market. With Brazil’s large housing deficit still very much present, there remains plenty of scope for further growth in the property sector over the coming years.”
5. Barbados
“The market for properties priced between $1.5m to $2.5m was dead a few years ago, but it’s where we are seeing most demand now and predict this will continue next year. Typically buyers in this price bracket are aged in their late forties to early fifties, the children are out of the house and typically they are looking at succession planning in their business/profession. Whereas buyers of larger villas in the $3m plus market will be approaching retirement and have already sold their business. Fractional ownership has also drawn a younger audience and has proved to be a popular stepping stone into full ownership.”
“We are anticipating a good season as demand for property has increased this year and we predict this will continue next year, especially among the British, who account for the majority of our international sales.
“The $10m plus market continues to prove steady and there are no signs of this abating. Prices will stay where they are and grow for premium properties looking forward.”.
6. Menorca, Spain
“You have to take into account the idiosyncrasies of Menorca; here the urban building regulations are very strict and new construction in a rural area is completely forbidden. In the rural areas you can only restore existing buildings/properties. However, this is what preserves the island’s natural beauty and makes it so special. I predict that prices for top located properties will continue to rise next year due to the balance of supply and the fact that each year there are fewer quality properties on the market”.
7. Ibiza, Madrid, Barcelona and Valencia, Spain
"2015 has ended on a positive note for all of Spain’s prime property locations. The more traditional second home locations of Marbella and Ibiza, where the market is almost entirely dominated by international buyers, are continuing to perform extremely well with particularly strong results for new developments.
“Perhaps even more encouraging for the Spanish property market as a whole are the signs that prices in the three main cities, Madrid, Barcelona and Valencia have stabilised and are beginning to slowly increase. In all of these locations, the improving market conditions are being driven by increasing levels of confidence amongst national buyers, something that is crucial for the market’s long term recovery.”
8. Algarve, Portugal
“With more than 300 days of sunshine a year, stunning beaches and diverse lifestyle options, it’s no surprise that Portugal’s Algarve remains a popular destination for holiday makers and second-home owners. The Algarve also offers buyers fantastic prospects for capital growth, with prices still well behind their 2007 peak. There has been a small boom in property sales over the past year thanks to the improving economy and Golden Visa scheme. And with demand for new homes in Portugal continuing to outstrip supply, prices look set to continue their upward trajectory throughout 2016.
“There were some tough years in the middle of the last decade, but it’s wonderful to see the Portuguese property market back on an even keel again now. Prices look set to rise at a comfortable rate over the next few years. I would say capital growth of 3-5 per cent, per year should be achievable for those who invest in the market during 2016.
“Data from the RICS/Ci Portuguese Housing Market Survey concurs. The August 2015 report suggested that prices would increase by roughly 5 per cent, per annum over the next five years.”
9. Tuscany, Umbria, Italy
“The latest available official (Sources ISTAT national statistics and Agenzia delle Entrate Inland Revenue) figures for the Italian residential property market are reasonably encouraging. At the end of 2014, the total number of residential property transactions had increased by just under 1 per cent during 2013, and this was the first positive indicator since 2008.
“Then in the first quarter of 2015, the number of sales was actually slightly lower than in 2014, but by the end of June we were seeing + 2.8 per cent over the first half of 2014.
“Most of this improvement comes from sales of properties in the north and centre of the country, including Tuscany and Umbria. There is a growing feeling that this modest positive trend in sales may continue during 2016. This is aided by price stability or even further reductions of prices of properties, whose owners are under strong pressure to sell.”
10. Andorra
"The Andorran property market is booming and we expect this to continue in 2016. We have a positive outlook for the next 12 months. Property prices will slowly increase and the market will continue to welcome investors from across the globe, notably those in France, UK and Germany. We are also expecting the recent increase in Swiss buyers to continue into 2016.
"Andorra is now firmly a key destination for investors, not only for its attractive tax benefits, but also because of the security offered by the country and its breath-taking scenery."
"The average price of properties that are currently being sold is 400,000 euros, although this increases to 1,500,000 euros in the prime market. The most popular properties are situated in central locations like Andorra la Vella, Escaldes, La Massana and Ordino."
11. Home Counties, England
“With house prices in the capital recording a 7.2 per cent rise in the last year, there is growing interest in the commuter hot spots as house buyers seek the relative financial comfort of the Home Counties. With the opportunity to buy a family house for the price of a London flat, and a commute of less than an hour, it’s easy to see the appeal of the commuter belt. The South Oxfordshire town of Didcot is one such hot spot, where Bellway Homes has recently launched a collection of new homes at Great Western Park.
“Didcot has been designated as an area of major growth and has benefited from substantial investment over the last eight years, with plans to build 200 homes a year over the next decade, and regenerate its busy train station. No surprise then that property values in the area have increased by over 25 per cent in the last five years, making it the perfect time to buy in this prime location.”
12. Costa del Sol and Marbella, Spain
“In the Costa del Sol and particularly Marbella, we predict a rise in prices mainly due to continued demand and a lack of product for wealthy buyers. We predict a greater number of UK buyers benefiting from the power of a stronger pound and a weaker Euro, a greater number of clients from Russia and the Middle East, where economic and political uncertainty are motivating factors for wealthy individuals and families looking for a foothold in Europe. And in general, a continued demand from buyers looking for a change of lifestyle buying a permanent home in the best and most reliable climate in Europe.”
Adam Neale, owner of Terra Meridiana (www.terrameridiana.com)
13. Abruzzo, Italy
“Brits are enamoured with Italy. This is demonstrated by Gate-Away.com’s recent statistics that show them in first position during 2015 for the number of enquiries they sent to the portal for property for sale in Italy via the website. They also beat the Americans. And this trend is likely to remain the same for 2016 when property prices in the 'boot-shaped' country will continue to decrease during the first months of the year. That's why you'll certainly have a good chance of finding the cheapest available deal in the sun.”
But where to buy? Abruzzo region, in the centre of Italy, is slowly but relentlessly threatening Tuscany, which has always been the most sought after destination of Italy.”
14.French Alps
“With the weakening of the Euro back to an eight year low, we have seen a huge surge of savvy investors who have decided to take the plunge and buy in the French Alps. Currently, we have the opportunity to launch a handful of new property developments in the best ski resorts in France, and as a result feel confident in forecasting an avalanche of sales this year.”
15. Madrid, Spain
“Madrid real estate is attractively priced compared to other large European cities. Being Spain’s political, financial and business capital, Madrid has a lot of investment potential. It offers value for money, an outstanding quality of life and is considered a safe haven.”
16. South and east of England
The strongest price rises are expected in parts of the south and east of England, which offer value relative to the capital, so should benefit as the ripple gains traction. Growth beyond will depend on the strength of regional wealth generation and the ability of cities such as Manchester and Birmingham to act as catalysts to reinvigorate their housing markets.
Mainstream five year forecasts: 
17. London, SE1
“SE1 was recently in the spotlight as Renée Zellweger took to Borough Market for the filming of the latest Bridget Jones instalment. However since her first outing in 2001 where her one bedroom flat would have been likely to cost between £100-150k, times have changed considerably.
“Back in 2001, Borough certainly wasn’t a desirable location but nowadays there has been so much investment into Borough Market and London Bridge that you would be looking to spend between £600k and £1 million for a one bedroom flat here. Developments such as Crest Nicholson’s Valentine Place, are bringing an array of luxury homes to this part of London.
“It has become a highly coveted micro-location where the financial and media industries crossover with the sought after lifestyle on offer around the market and the cultural attractions of the South Bank, not to mention the appeal of being close to the river Thames.
“The SE1 area offers a wealth of transport connections at Waterloo, Blackfriars, London Bridge, Southwark and Borough, ensuring that residents have easy access to wherever they need to be. When the Thameslink Programme is completed in 2018, encompassing a newly improved London Bridge station, journeys will be improved even further with newer and more regular trains passing through at peak times. “It is little surprise that prices here are on the up, but it is important to recognise that the area still offers relative value for money.”
18. Barcelona and Poland
“The UK buy-to-let landscape changed significantly in 2015 by a series of policy moves, from pension liberation rules, to tax relief limits, to the introduction of a 3 per cent stamp duty surcharge for buy-to-let landlords.
“So property prices may see more subdued growth in the short and medium term, but unless more housing stock is built, then prices still face upward pressures. Many property investors may look elsewhere, including abroad. Take cities in demand around Europe such as Barcelona in Spain or Warsaw in Poland, where the dynamics of property prices and rental yields are attractive for investors. This is an alternative to paying increased stamp duty surcharges in the UK and an alternative to all the extra layers of legislation landlords now face in the UK.”
19. Berlin, Germany
“Berlin property prices have risen in price since 2014-2015 in locations such as Lichtenberg, Treptow and Köpenick by 19 per cent on average. In locations such as Mitte and Charlottenburg we’ve had a 12 per cent increase but on a high price level. People should budget 4.000€ per sq. mtr for a period property or 5.000€ per sq. mtr. for a new build in Berlin.”
20. London, E16
“Over the last eight years Hong Kong, Singapore and Malaysia have dominated the international buyer profile in London. I expect this to continue over the next year, but I think we will also see more buyers coming from mainland China. Mainland Chinese buyers have always understood the US market – the US economy is one they aspire to and there are huge US manufacturing companies everywhere, providing education opportunities which we have lacked in the UK. However, over the last decade lots of developers have made a continuous effort to host exhibitions and conferences in China, which are beginning to bear fruit and Chinese buyers now have a good understanding of the market here. After the stock market jitters in China earlier this year, people are looking to diversify their assets and less money is going into the local stock market.
“Far Eastern buyers are generally most interested in value and like areas where capital growth can be displayed and good rental yields can be generated. Parts of zone 2 and especially zones 3 and 4, where prices are still under 1,000 per sq. ft. are the sweet spots for overseas investors. They like new districts – a good example is E16 – it’s right next to the Chinese Business Centre and values are currently hovering around £800 per sq. ft.”
