The latest Nationwide House Price Index shows that annual house price growth was unchanged from the previous month at 2%. As a consequence, taking into account seasonally adjusted monthly house price growth of 0.3%, the average UK home is now valued at £214,922. Despite all the doom and gloom in the mass media there is a strong core of support for the UK property market although there are still many challenges ahead.
However, one trend that is strengthening is the significant difference in house price growth between London and the rest of the UK.
London house prices
There is no doubt that London property prices are under pressure in the midst of what can only be described as difficult Brexit negotiations. The region posted a fifth quarterly fall in annual house prices with the latest figure showing a fall of 0.7%. While it is likely that London will be subdued at best in the short term, it is worth reminding ourselves that London prices are still 50% higher than 2007.
When you consider the worldwide economic collapse of 2008, the resulting issues with money supply as well as Brexit negotiations it is fair to say London has more than held its own. Whether the recent trend of homeowners “cashing in their London premium” continues, remains to be seen. However, those calling the death of the London housing market may well, again, find they have been a little premature and well short of the mark.
Local and national property markets
The English property market outside of London has seen some stellar performances with annual growth in Yorkshire and Humberside hitting 5.8% in September. The East Midlands was not too far behind with growth of 4.8% although the North of England recorded a drop of 1.7% in house prices over the last 12 months. The performance of the likes of Yorkshire and Humberside looks even better compared to average growth of just 1.4% across the whole of England.
On a national basis, house prices in Northern Ireland increased by 4.3%, Wales by 3.3% and Scotland by 2.1%. If the London property market was taken out of the picture, the average performance of property prices in England would be markedly improved.
Growth forecasts for the UK economy have been reduced of late but the economy is still expected to grow by in excess of 1% in 2018 and 2019. When you consider these years should in theory be the peak of the Brexit concerns this would be far better than anybody could have forecast after the vote in 2016. There are numerous factors currently supporting the UK property market which include:
- A shortage of suitable stock
- Relatively low finance costs
- Ever-growing demand for private rental properties
- Government incentives
It would be fair to say that political uncertainty is holding back UK economic growth to a certain extent with business owners delaying significant investment until the political situation is clearer. It seems almost inevitable we will have another general election within the next 12 months which could prompt a period of stagnation for the UK property market.
When you consider that recently the UK government has managed to milk the UK property market of yet more direct and indirect taxes, but prices are still increasing, surely this indicates some level of underlying support? There is also talk of foreign investors holding off for the time being, ahead of the conclusion of Brexit, but there are significant cost benefits with the current level of sterling on the money markets.
Few experts are willing to go out on a limb with a more positive view on the UK property market. So far even the worst of Brexit and the U.K.’s political situation have still left average house prices rising year-on-year.