For many of us who are lucky enough to own our own homes, this is our biggest financial asset. Figures from the ONS Wealth and Asset Survey show that net property wealth – what’s left after deducting mortgage debt – amounted to about £4.6 trillion over the period between July 2014 and June 2016. That’s equivalent to about 2.5 times the UK’s output in 2016!
So with Spring just around the corner what’s in store for the UK property market for the remainder of 2018?
Let’s start with what is happening to house prices currently. According to the Sunday Times of 18th March 2018 the latest reading from the Nationwide building society revealed that values fell by 0.3% in February to an average of £210,402, while annual growth has slowed to 2.2% down from 3.2% the previous month.
House price inflation has been gradually weakening over the past two years, a trend Robert Gardener, Nationwide’s chief economist expects to continue. Mr Gardner said “The year ahead will be determined in large part by developments in the wider economy and the path of interest rates.” Overall, he concludes that Brexit developments will remain a key factor. And he expects house prices to be broadly flat, with a marginal gain of about 1% over the course of 2018.
There is good news however for homeowners here in the South West. KPMG predicts that the strongest annual price rises of any region in the UK over the next four years will be in the South West, typically 4.25% a year, KPMG says, followed by the West Midlands at 3.75%. KPMG believes that London will see the slowest gains of any region in the UK over the next four years, at just 1.5%.
The Royal Institution of Chartered Surveyors (RICS) thinks prices overall will be flat this year but within this context, values in London and the South East will fall, alongside weaknesses in East Anglia and the North East.
Howard Archer, chief economic adviser to the EY Item Club which uses the Treasury model to analyse and forecast the economy also expects a modest rise this year. Supply shortage will limit the weakness of prices but he argues that they will be held back by other factors including the expected squeeze on consumer purchasing power and fragile confidence about engaging in big transactions. Archer further points to likely further interest rate rises n 2018. The Bank of England is expected to raise interest rates twice in 2018. Furthermore, as he points out house prices are quite high relative to incomes.
