Positive news suggests the UK housing market will bumble along nicely

When Theresa May called a snap general election and then failed to win a majority you could have been forgiven for thinking it was all over for growth in the UK housing market after a pretty slow Spring.

But far from it. In the last week there has been one bit of positive news after another both in terms of the sales market and the lettings market.

First, the Nationwide index showed that house prices increased by 1.1% month on month in June, regaining the momentum lost in the previous month and suggesting that Brexit and a hung Parliament are not dampening the residential property market.

Indeed, the price rise in June effectively erased the decline recorded over the previous three months and the index also showed that the gap in house price growth between the strongest and weakest performing regions in the second quarter of the year was the smallest on record.

Then, there was some positive news from letting agents. The monthly report from the Association of Residential Letting Agents showed that more than a quarter of members reported that rents increased for tenants in May, the highest level since July 2016.

Just 2.8% of tenants negotiated a fall on their rent, following on from 2.2% in February and compared to 3.6% in March and the data also showed that over the last 12 months the supply of rental stock has risen by 11%.

Towards the end of the week the new index from Your Move showed that rents increased across most of England and Wales, even in London where they rose for the first time since November 2016.

And while property prices

in London’s prime property market softened in the second quarter of the year, according to Savills, they were down by just 0.9%, indicating that the market could be bottoming out.

Some of the other figures from the Savills report are interesting. While prices in this sector are down 5.3% year on year and are 6.9% below their peak in the middle of 2014, they are still up 30% since the economic downturn.

Liam Bailey of Knight Frank believes that despite renewed political uncertainty in the UK recent and Brexit, trends will largely continue, at least for the remainder of this year. He points out that prime markets, especially in London, have been experiencing a tentative improvement in sales activity, from the very low levels which were due to stamp duty changes rather than political issues.

Meanwhile, continued lack in the mainstream market of supply is continuing to push up prices even although first time buyers still struggle to get on the housing ladder and will do so as long as prices keep rising.

And here lies the conundrum, a rising market is regarded as a healthy market, but first time buyers still need financial help from parents and the Government and record low interest rates which are keeping mortgage costs down will not be around for ever. Indeed, there are indications that they could rise sooner rather than later.

So is the good news really good news? There are also going to be even tougher mortgage affordability measures coming in, inflation continues to rise, employment could take a hit, goats might fly! We should just be grateful that Brexit and a Hung Parliament have not yet had a huge impact but be aware that the road ahead could still be bumpy.