The mole still has a mountain to climb in 2018 UK housing market
Predictions for the UK property market in 2018 are coming in with the outlook generally one of steady and stable, although it will be a mixed picture depending on locations.
Regional differences are nothing new in the housing market, but it looks as if next year will also see quite marked fluctuations depending on the sector, with prices set to rise initially in the typical first-time buyer market of homes with two bedrooms or less.
This is for several reasons, but most notably because stamp duty has been abolished for the majority of first-time buyers. Even the government has admitted that demand will result in prices at the lower end of the market rising.
Rightmove is predicting that asking prices for first-time buyers could rise by 3% in 2018, compared with 1% for the housing market overall, while the upper end could see no change or falling prices. Its prediction of 1% growth for the market as a whole is the lowest since 2011.
It is symptomatic of the more challenging market some sellers will find themselves in, particularly in London and the South East where prices and sales have been undergoing some level of adjustment, mainly at the higher end of the market.
The latest outlook from agents Winkworth also suggests a mixed picture depending on location and price band. It points out that affordability will continue to be an issue in London with prospective home movers uncertain of the economic outlook and the effect of Brexit.
However, at the upper end of the market, overseas buyers will be able to continue to take advantage of currency exchange as the Pound fluctuates negotiations.
This all makes sense if first-time buyers do indeed push onto the housing ladder and there are some indications that it will not be as easy as you might think. Yes, stamp duty being abolished is a big plus for many, but in some areas of the country, most notably Scotland, most homes sold to first time buyers are for less than the lowest stamp duty threshold anyway.
Many commentators think that the recent rise in interest rates will not deter some buyers, but buyers themselves seem to think differently. The most recent research published a few days ago from hybrid estate agent eMoov reveals that 56% of owners aged 25 to 34 say they have been deterred from climbing further up the housing ladder due to the recent rise in interest rates.
If current owners do not move up the housing ladder there will be even fewer homes available for first-time buyers and
during
the
Brexit supply will therefore continue to be very low, leading to price rises in this sector.
It should also be remembered that the biggest cost burden for first-time buyers is the deposit. New research from L&C Mortgages shows that the average deposit put down by first-time buyers in the UK is now GBP 51,821 which could rise to GBP 65,930 in five years and in ten years reach GBP 81,468. The figures are much higher in London.
It also reveals that a quarter of first-time buyers haven’t saved anything towards a deposit and by 2027 first-time buyers could need 28% of a property’s value as a deposit.
The abolition of stamp duty will not have much of an impact, it is still the deposit that is the mountain to climb and even with hopefully more new homes being built in 2018 than this year, the first time-buyer still looks like a tiny mole.