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