A ‘Boris Bounce’ predicted for the housing market
But the remaining political uncertainty will keep a lid on price rises, forecasters claim
THE housing market should start 2020 with a new mood of confidence – but continued political uncertainty will keep a lid on property prices, economists predict. Several predictions for house price growth across 2020 are clustered around the 2% mark.
Experts said the Conservatives’ recent general election win could help to bring more certainty to the market and unleash some pent-up buyer demand. An abundance of low-rate and low-deposit mortgage deals should also support activity.
Some estate agents are even sensing there may be a “Boris bounce” for the housing market, which could have an effect on house prices in coming months.
Lucy Pendleton, founder director of estate agent James Pendleton, said: “Not yet visible is the Boris bounce in house prices we all sense is already under way.”
However, Brexit concerns could also pick up as 2020 progresses, making people behave more cautiously, and affordability constraints will also cap price growth in some parts of the UK, economists said.
Howard Archer, chief economic adviser at EY Item Club, a leading UK economic forecasting group, said the Conservatives’ strong election win could ease some uncertainties and help house prices rise by around 2% in 2020. But he said the economy still looks set for a “challenging 2020”.
Howard said: “There will still be appreciable uncertainties, including on the Brexit front – so that the upside for house prices in 2020 is likely to be limited.”
Rightmove also predicts that the price of property coming to market will increase by 2% in 2020.
Sellers’ pricing power will be boosted by a lack of other options for potential buyers, Rightmove suggests.
Lawrence Bowles, senior research analyst at Savills, said: “At the top end of the market in particular, we’ve seen a strong build-up of new buyer demand.
“Greater political certainty will unlock some of that demand, but with less than a year to agree a Brexit deal, there are still many unknowns. As a result, we expect average house prices to rise by just 1.0% in 2020, and a higher 4.5% in 2021, as improving certainty translates into higher growth in wages and GDP.”
Looking further ahead, Savills predicts that the North West of England and Yorkshire and the Humber will experience the fastest house price growth over the next five years. House prices in these areas were slower than those in southern England to recover after the financial crisis – meaning there is more room for growth.
Mr Bowles continued: “Affordability constraints in London and the South East will cap potential price growth over the next few years.
“By contrast, prime central London – the most expensive core of the capital – now looks relatively good value on a world stage. We expect to see five-year growth totalling around 20%.”
The Royal Institution of Chartered Surveyors (Rics) has also pencilled in house growth of 2% for 2020 – but it believes rents will increase at a faster rate of 2.5% as the rental sector struggles with a lack of housing supply.
Meanwhile, Nitesh Patel, Yorkshire Building Society’s strategic economist, believes the number of house sales will hold at around 1.2 million annually.
He said: “A strong jobs market and low mortgage rates are likely to support the market, but concerns around affordability may limit the number of people wanting to move home.
“Mortgage lenders are helping to maximise affordability by lending on 40-year mortgage terms, to help borrowers lower their monthly repayments.
“We’re seeing more and more lenders giving access to 5% deposit mortgages, which can be useful for those looking to buy their first home.”
Russell Galley, managing director, Halifax, said housing market prospects for 2020 look “a bit brighter” than in 2019.
He continued: “However the shortage of homes for sale and low levels of house-building will continue to support high prices, while the challenges faced by prospective buyers in raising the necessary deposits may continue to constrain demand.
“As a result, our forecast for house price growth in 2020 is in the range of 1% to 3%, consistent with the pattern of weaker growth seen since 2017.”
Separate consumer research from Lloyds Bank found 43% of people think the biggest challenge for firsttime buyers in 2020 will be raising a deposit, while 27% think it will be high property prices.
A quarter (25%) think the biggest challenge for existing home owners looking to move will also be expensive property prices, while 23% cited high moving costs as one of the major obstacles to moving.