‘Slow and steady’ for UK hous­ing mar­ket is the most likely out­look

Financial Mirror (Cyprus) - - FRONT PAGE -

Prices, prices, prices – as a na­tion we are ob­sessed with how much our homes are worth. Who hasn’t gone on the in­ter­net and had a look at val­ues, or when a prop­erty in their street comes on the mar­ket taken a sneak peek at the es­tate agents’ de­tails?

There has been a lot of talk of the hous­ing mar­ket slow­ing, and it has done so in the last 18 months, but even so prices are still tick­ing up and look set to con­tinue do­ing so. The fac­tors that will in­flu­ence by how much are the usual sus­pects such as the econ­omy, Brexit ne­go­ti­a­tions and in­ter­est rates.

On the ra­dio, econ­o­mists were pre­dict­ing that the Bri­tish econ­omy was likely to weaken go­ing for­ward, but in­fla­tion is not set to boom, while in­ter­est rates will rise at some point in the next year. But any changes to any of th­ese head­line in­di­ca­tors is likely to be small, no big sur­prises are ex­pected.

While an­a­lysts re­veal their head­line fig­ures and we all re­port them, it was in­ter­est­ing to read new re­search from on­line es­tate agent eMoov which looked at what would hap­pen to prop­erty prices if the cur­rent slow, but steady, growth con­tin­ued over the next decade.

The firm used data from the Land Registry and ap­plied the rate of growth to the cur­rent av­er­age house price on a monthly ba­sis up un­til 2027 to ob­tain a new av­er­age house price. It then cal­cu­lated the to­tal per­cent­age dif­fer­ence be­tween the cur­rent and fu­ture av­er­age house price in or­der to rank ma­jor cities based on the high­est to­tal growth rate.

It cal­cu­lated growth lev­els of that even if the slower re­cent months con­tinue, val­ues would still rise by 56% in the next decade. This is based on the av­er­age house price hav­ing risen on av­er­age by 0.37% a month since the ref­er­en­dum vote in June 2016, com­pared to 0.67% a month on av­er­age be­tween June 2015 and 2016. On­go­ing this would take the av­er­age price of a home to GBP 347,757 in the next ten years.

On this ba­sis Not­ting­ham, Glas­gow, Cardiff and Ed­in­burgh are set to see the strong­est price growth, while Lon­don would have one of the low­est per­cent­age in­creases in value along with Ox­ford, Nor­wich and New­cas­tle.

While it is by no means a given that such low monthly price rises will con­tinue, and some lo­ca­tions will see prices fall, it is a re­minder that the prop­erty mar­ket is not a get-rich-quick kind of thing; whether you are an or­di­nary home owner, a buy-to-let land­lord or an over­seas in­vestor, prop­erty is a long term game.

Even in Lon­don, and the city’s higher-end mar­kets in par­tic­u­lar, slow but steady growth is ex­pected in com­ing years. New re­search from prop­erty con­sul­tants Clut­tons shows that a rise of 10.4% is pos­si­ble by 2021. It ex­plains that prices are set to soften fur­ther this year be­fore grow­ing again in 2018.

It also pre­dicts that in­ter­est rates will rise, nam­ing the sec­ond half of 2018 as a po­ten­tial date, and adding that they could reach 1% from the cur­rent 0.25% by the end of 2019. And it sug­gests that too many ex­pen­sive new homes are be­ing built, over­priced for the cur­rent mar­ket, an is­sue that devel­op­ers need to ad­dress.

A sep­a­rate look at the Lon­don mar­ket from Lon­don Cen­tral Port­fo­lio sug­gests that the sec­tor is re­cov­er­ing with sales up 4.8% year-on-year and av­er­age prices ris­ing, al­though it adds that this is gen­er­ally due to the top end of the mar­ket still be­ing seen as a safe haven for for­eign buy­ers rather than any mean­ing­ful growth with the most ex­pen­sive sale so far this year at GBP 90 mil­lion for a flat in Knights­bridge skew­ing the data.

There shouldn’t be any alarm about the lat­est Na­tion­wide in­dex show­ing that prices fell over­all by 0.1% in July. With the econ­omy ris­ing by just 0.3% in the sec­ond quar­ter of the year, slower house price growth has been ex­pected. The un­der­ly­ing fun­da­men­tals still point to a slow and steady out­look.

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