House prices across the UK could “flatline” next year, says The Guardian, adding: “Uncertainty caused by the EU referendum and weaker consumer sentiment will result in two quiet years in the housing market, according to property firm Savills.”
Savills predicts the average price will not move at all through 2017, followed by modest growth of two per cent in 2018.
Things will improve in 2019, it says, when prices could return to growth in excess of five per cent, but after that, a medium-term economic hit from Brexit will reduce property inflation to two per cent by 2021.
Savills’ forecasts are still better than what was broadly predicted by economists in the event of a Leave victory at the EU referendum and the hefty falls some still believe will happen.
The estate agents’ estimates are in line with a range of other housing indices, but it does not concur with the general perception of shift in buyer demand away from expensive areas such as London to more affordable regions.
Instead, it believes that while London and the Midlands will see no price growth next year, the likes of the north-east and Scotland will see outright declines.
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“Only the south of England outside the capital is expected to buck the trend, with growth of up to 2.5 per cent,” says the Guardian.
Lucian Cook, Savills’ UK head of residential research, said: “The effect of Brexit is complicating a natural shift towards the later stages of the housing market cycle, when the strongest growth is seen beyond London and the south-east.”
“What is clear is that the housing market does not like political and economic uncertainty and this points to a lower growth, lower transaction market across the board.”
Cook says first-time buyers will remain under pressure as there will be a shortage of supply and prices will remain high, making deposits still difficult to achieve.
In turn, this will stoke demand for rental properties and prices in this sector will rise much faster than house prices. “Rents will go up by 19 per cent between now and 2021, while house prices will only rise by 13 per cent,” says the BBC.
House prices: ‘This is not the time to press the panic button’
House prices failed to grow for the first time in 16 months in October, according to the latest index published by Nationwide yesterday.
But, says Alex Gosling of online estate agents HouseSimple.com: “This is not the time to press the panic button.”
October’s standstill was inevitable, he added. “There have been signs for a few months that the property market might be running out of steam,” he told the Daily Mirror. “It just feels like an over-priced market has finally taken its toll.”
Despite that, Gosling does not believe the “stalled” market is set to turn sharply negative. “Property transactions are down on levels we would normally expect this time of the year and it may be that buyers are simply taking a breather until the New Year,” he said.
Gosling is not alone in his optimism. A number of estate agents yesterday highlighted the positives, saying the market has shown resilience since the vote for Brexit and that activity is returning.
“The ‘End of Days’ scenario some predicted for the property market hasn’t materialised,” said Mario Berti, the head of Newcastle-based Octopus Property.
There had been predictions of a sharp correction in property prices in the event of a Leave victory in June’s referendum.
However, house price indices have recorded consistent increases. Even Nationwide found annual rates are in line with a long-term trend since the beginning of 2015.
Estate agents say buyers are already returning to the market after a sharp drop in demand in July and August, something the Royal Institute of Chartered Surveyors has also reported.
North London estate agent Jeremy Leaf said: “Buyers and sellers have longer-term confidence in the market and are pulling out all the stops where they can to take advantage of lower borrowing costs as many appreciate that they won’t be around for ever.”
Nevertheless, several analysts are still forecasting a hefty fall, with ING Bank’s senior economist James Knightley forecasting a drop of five per cent next year, says the London Evening Standard.
Almost all agree the real test will come next year, when Brexit negotiations are due to start in earnest and the economy’s steady course could be derailed.
House prices end growth run in October
House prices stayed the same in October, says Nationwide, bringing to an end an unbroken run of 15 consecutive monthly increases dating back to June 2015.
The building society’s monthly index, the longest-running in the UK, reveals an average property last month cost £205,904, unchanged from September.
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Robert Gardner, the chief economist at Nationwide, said there are signs that housing market activity is “fairly subdued”, with house sales about ten per cent below levels seen last year.
This is not only related to the vote for Brexit in June, he added, but reflects a softening that has been taking place since a three per cent stamp duty hike on second homes in April, says The Guardian.
Gardner also said that the annual rate of house price growth remains in line with a long-run average since the beginning of 2015, down from 5.3 to 4.6 per cent.
This suggests that the overarching trend since the Brexit vote – a sharp slowdown in activity that is already being reversed – is holding. House price growth is generally expected to be slower but broadly positive in the months ahead.
Nationwide’s index is based on its own mortgage lending activity and tends to show lower headline growth than rival surveys. However, typically it tracks the same underlying trends.
October’s report also emphasised a regional disparity in affordability that is currently favouring buyers in “northern England, Wales and Scotland”, but hitting demand in expensive areas such as London.
Howard Archer, the UK economist at IHS Global Insight, told the BBC house prices will continue to rise slowly in the short term but could come under more pressure next year.
“We believe housing market activity is likely to be increasingly pressurised in 2017 by heightened uncertainty [related to Brexit] constraining consumer confidence and willingness to engage in major transactions,” he said.
House prices didn’t grow for the first time in 16 months
House prices did not grow in October, bringing to an end an unbroken run of 15 consecutive monthly increases dating back to June 2015, according to data published today by Nationwide.
The building society’s index, which is the longest-running in the UK and the first of several to be published each month, shows that the average property across the country was unchanged in October, at £205,904.
Robert Gardner, chief economist at Nationwide, said there were signs that housing market activity remained “fairly subdued”, with house sales about 10 per cent below levels seen last year.
He said this was not just related to the Brexit vote but also reflected a softening that has been taking place since a three per cent stamp duty hike on second homes in April, says The Guardian.
Gardner also pointed out that the annual rate of house price growth remains in line with a long-run average since the beginning of 2015, down from 5.3 to 4.6 per cent.
This suggests that the overarching trend since the Brexit vote, of a sharp slowdown in activity that is already being reversed, is holding. House price growth is generally expected to be slower but broadly positive in the months ahead.
Nationwide’s index is based on its own mortgage lending activity and tends to show lower headline growth than rival surveys, but typically tracks the same underlying trends.
Its latest report also emphasised a regional disparity in affordability that is currently favouring buyers in northern England, Wales and Scotland, but hitting demand in expensive areas like London.
Howard Archer, UK economist at IHS Global Insight, told the BBC that house prices will continue to rise slowly in the short term but could come under more pressure next year.
He said: “We believe housing market activity is likely to be increasingly pressurised in 2017 by heightened uncertainty [related to Brexit] constraining consumer confidence and willingness to engage in major transactions.”
House prices: Mortgage lending rebounds to three-month high
There was a strong rebound in mortgage lending in September, according to the Bank of England’s monthly report, confirming the recovery in the sector.
“Mortgage approvals picked up more strongly than expected” and hit the highest level since the Brexit vote in June, reports Reuters.
Approvals hit 62,932 in the month, up three per cent on August and well above the 60,150 expected by analysts.
This is the second report in a week to show a strong rebound in lending activity; the British Bankers’ Association showed a similar upturn for September.
Mortgage approvals are considered a “gauge of future housing market activity”, which itself is a useful indicator of house price trends. Higher transaction volume tends to drive values higher.
Before the EU referendum, the Treasury had predicted a Leave victory would knock ten percentage points off house price growth while the Bank of England forecast mortgage approvals would slump to a monthly average of 56,000 in the second half of the year.
But after a major slowdown in July and August, a number of surveys have shown buyer demand returning and a sharp correction in house prices is now no longer expected.
Price growth is still expected to be slower – and the Bank of England report shows approvals remain lower than the monthly average before the Brexit vote.
Property group JLL predicts a positive-but-slower house price trend, forecasting that typical property values will increase by 0.5 per cent in 2017 as transactions drop 17 per cent.
Prices will then recover as greater clarity emerges on the direction of Brexit negotiations, increasing one per cent in 2018 and two per cent in 2019, says the Daily Telegraph.
Housing inflation will continue to be positive in part because the supply of new homes could slow as a result of Brexit uncertainty, squeezing an already under-supplied market, says JLL.
House prices in towns around M25 jump 550%
House prices in towns around the M25 have risen by more than 550 per cent since the motorway opened 30 years ago, says a new report from Halifax.
“The average price of a house in the 40 towns that line the London Orbital motorway was £59,183 in 1986, rising to £385,085 in 2016,” says the Daily Telegraph, a rise of 551 per cent.
Some towns have seen even greater increases: in ten of areas along the 117-mile road, “house prices have risen by more than £400,000”, adds the paper. The biggest increase has been in Barnet, which has seen property jump 674 per cent.
Martin Ellis, the housing economist at Halifax, said: “The most expensive towns… are in the southern section of the motorway and on the north side, while towns east of London typically have the lowest prices.”
Despite the stellar growth, which is more than three times the 169 per cent increase in the Retail Price Index, the highest rate of inflation, the M25 increases are not unique, says the Telegraph. They are “identical to the national rate [of] 552 per cent” over the same period.
What the Halifax data does show, however, is the ripple effect of house price rises emanating from London over the past three decades.
Increases in commuter towns around the M25 are well short of the surges seen in the capital. In 1986, a typical property in one of the 40 towns was worth 0.6 more than the average in London while today, it’s worth 32 per cent less.
Nevertheless, property in these towns has advanced relative to the wider south-east and is worth 16 per cent more than the regional average.
The decision to expand Heathrow airport with a third runway will mean some M25 towns will struggle in the coming years, says Russel Quirk, the founder of online estate agent eMoov.
“Homeowners in Hounslow, Kew, Windsor, Maidenhead and other surrounding areas” will be particularly affected by “a lengthy construction process and ongoing noise and air pollution”, he told Mortgage Introducer.
While hundreds of houses in Longford and Harmondsworth will be demolished, owners will be handsomely compensated with a payment of the full market value of the home plus 25 per cent.
House prices: Buyer demand back at pre-Brexit level
House buyer demand across the UK rose in September, according to a new survey being seen as further evidence of a recovery in the housing market from its post-Brexit vote slump.
The latest monthly poll from the National Association of Estate Agents recorded a 16 per cent rise from August, taking demand back to levels last seen before the EU referendum in June, says the Daily Express.
The number of prospective buyers per estate-agent branch also rose, from 287 the previous month to 333.
“At the same time, the number of sales agreed increased by 12.5 per cent… to an average of nine per branch,” adds the Express. Supply of houses for sale dipped from 41 per branch to 40.
This has positive implications for house prices, which some predicted would nosedive in the wake of the Leave victory. A shortage of supply is being cited as underpinning higher prices, despite the economic uncertainty.
This is not the first survey to show the sharp dip in demand and transactions yielding to a strong rebound.
However, despite the nationwide improvement, there has been consistent evidence of a regional disparity, with London’s former powerhouse market struggling with longstanding affordability concerns and other areas doing far better.
Estate agents Haart today reported the number of transactions in the capital collapsed from 60,000 to 30,000 between June and August and fell a further 7.4 per cent last month.
“However, Haart’s data delivers a more promising picture for the nation… with branches 100 miles from the city reporting 75 per cent increases in activity,” says The Wharf.
Paul Smith, the chief executive of Haart, told City AM: “This could be a historic realignment of our property market away from central London, or a purely post-Brexit ‘flash in the pan’ phenomenon.
“What is clear is that since June, Britain’s property market has been turned on its head and London, for a change, is beginning to rely on the rest of the country for life-support.”