House price predictions – 2017 and beyond

VARIOUS UK bodies issue interesting forecasts for residential house prices. For 2017, for the South East of England, there were four different predictions for house price growth:

-1%,1%, 2% and 7%. The actual growth rates for the South East were 4.8% (according to Housing Price Index) or

3.5% (Nationwide). On reviewing these forecasts to see how accurate they were, it becomes clear that forecasting is not an exact science, to say the least!

What we can deduce is that the forecasts were generally positive between -1% and 7%. The actual data was also positive at around 4% growth for the South East.

Another deduction is that house prices in the South East are outperforming the majority of forecasts. Reading the reports that accompany the forecasts, there is a general consensus that the market has ‘eased’ during 2017. The slower growth has several causes. Firstly, prices dropped during the Credit Crunch in 2007-2009. Then during the recovery, prices shot up. An average 1980’s two-bedroom flat in Wokingham Town Centre Wokingham for example dropped to around £200,000 8-10 years ago. A similar property would now achieve £250,000-£275,000.

This brings us onto the question as to why one property in the same town would achieve a higher price than another of similar size. Pricing can be complex. It is a cliché, but a true one, to say that the value of something is what someone else is prepared to pay for it.

Some properties can go up nicely during a period of growth. At the same time others might stay the same. This has to do with matters such as ‘kerb appeal’ (attractiveness of the front of the house), closeness to amenities such as stations, shops, school catchments, other types of buildings in the roads.

For example, certain commercial enterprises in a road might reduce a house price compared to a road that is purely residential. The list of items that affect house prices is fairly long.

Despite this complexity, in general people have usually seen a rising market as a ‘good thing’ and a falling market as a matter of concern. I should add that in recent times, there seems to be growing concern about younger generations being able to afford their own property, which is a subject in its own right.

Property prices have eased in 2017, even in Wokingham. The various forecasters agree on the causes, as you can see from the table in this article.

Forecasts

Savills links the growth of the property market to the effect of Brexit and economic growth. ‘It is difficult to see any significant potential for house price growth until the terms of (Brexit) are agreed and economic growth picks up.

Savills: www.savills.co.uk/research_ articles/141560/209213-0

Knight Frank believes that a slowdown has occurred due stamp duty and low levels of housing stock. But the low mortgage rates have kept property prices high, putting ‘a floor under pricing across the UK.’

http://www.knightfrank.co.uk/ blog/2017/05/22/uk-housing-marketforecasts

RICS predicts steady price increases over the next five years: ‘… the latest reading … points to an average annual increase of 3.2% in each of the next five years.’

www.rics.org/us/knowledge/marketanalysis/rics-residential-market-survey/

In summary, property prices reduce because of economic uncertainty, higher taxation of landlords, stamp duty and affordability. At the same time, property prices are stabilised because of ultra-low interest rates and a shortage of stock. RICS believes that house prices in the UK as a whole will increase by 3.2% per annum for the next five years.

Meanwhile, what can individual property owners do to maximise the capital values of their properties? To answer that we go back to the variables when pricing a property. There are variables which a property owner can control in order to maximise the price achievable. These are, to name a few, décor, curb appeal, general presentation, sensible internal layouts, neighbourhood watch, and so on.

For more thoughts on the Wokingham Property market – visit the Wokingham Property Blog at www.wokinghampropertyblog.co.uk Erica Townend is a director and co-owner of the Martin & Co estate agency in Wokingham and has been aligned closely to the world of property for almost 20 years. Opinions expressed in this column are her own.