Positive start to the year hides niggles for U.K. property market in months ahead

It has been a busy few days for the British property market with yet another new Housing Minister, housing elevated to Cabinet status and caution over how price growth and sales are going to pan out over the year.

There is still the shadow of Brexit around and consequently economic performance, both of which have the power to impact the housing market and we must not forget that the political system is not the strong and stable one that Prime Minister Theresa May envisaged a year ago.

So much for the big issues that can have an impact, there are also a lot of little, niggly things around. Indeed, Monday’s Rightmove index, the first to give an overview of what has been happening in the first few weeks of the year, warns that the market is price sensitive.

Miles Shipside, the portal’s housing analysis, even goes as far as saying that setting tempting asking prices and then quickly reducing them if there is little initial interest will be the key to selling a home this year, especially in less active locations.

He also points out that price rises have had a good run and the return of the days of optimistic pricing is consequently some years away and contingent upon earnings increasing and interest rates remaining low.

The latest YourMove index, covering England and Wales, also talks of challenges ahead. Tax changes have hit demand from buy-to-let investors and numbers of firsttime buyers remain below the long term average, although the abolition of stamp duty for first-time buyers is expected to boost this sector of the market, at least in the short to medium term.

On the face of it, rental growth has been fairly steady with the latest Countrywide index showing that they increased by an average of 2.4% in 2017, up from 1.8% in 2016. But it is worth taking into account that while the 2017 growth was a third faster than 2016, rental growth was still behind the 3.2% recorded in 2015 and 4.9% seen in 2014.

It also shows that London has moved from having the slowest rental growth in England to the fastest. Over the course of 2017, rents in London rose 3.2%, reversing the 0.8% fall recorded in 2016, taking the average in December to GBP 1,706, and Scotland was the only region in Britain where rental growth with rents up by 3.3%.

The rental growth in London is in contrast to what is happening with prices. The YourMove index shows that prices fell 4.1% in London in December year-on-year and were down 0.4% month-on-month. And it is not just the pricey parts of the capital that are seeing prices fall, with Southwark leading the decline with a drop of 21.1%.

There is confirmation of a poorer market performance in London in the latest index from HomeCoUk which shows annual price growth has now fallen in Greater London for 14 months in a row, with January seeing a decline of 0.9%. It was the only part of the country to record negative year on year growth.

It also shows that the Midlands and the North are seeing steady price growth, with experts predicting that it is more moderate than what was seen in London and the South East a few years ago and is therefore likely to be more stable.

It means that the dynamics are changing. It could be that we see growth in the North and Midlands and a slowly deflating London market with growth in the South East and the East of England also slowing. It is worth considering that this could also have an impact on the buy-to-let market as landlords outside of London see higher yields and perhaps better capital growth. It will be another year of change.

outstripped

London