Property prices in the UK increased by 0.2% in January and are now 4.3% above a year ago but the outlook is clouded by Brexit and economic uncertainties, according to the latest index report.
The modest rise at the start of the year took the average price of a home to £205,240 and prices have not been rising or stable since the vote to leave the European Union in June 2016, the data from the Nationwide shows.
Even although the British economy has remained much stronger than expected after the referendum vote, Robert Gardner, Nationwide’s chief economist, believe that the outlook for the housing market is far from clear.
‘Recent data indicates that the economy didn’t slow in the second half of 2016 and the unemployment rate remained stable at an 11 year low in the three months to November. However, there are tentative signs that conditions may be about to soften,’ he said.
‘Employment growth has moderated, and while wage growth has edged up in recent months, in real terms, earnings growth has already slowed. With inflation set to rise further in the months ahead as a result of the weaker pound, real wages are likely to come under further pressure. Employment growth is also likely to continue to moderate, should the economy slow as most forecasters expect,’ he explained.
‘On balance, we agree with the consensus view that the economy is likely to slow through 2017 as the squeeze on household budgets intensifies and heightened uncertainty weighs on business investment and hiring,’ Gardner pointed out.
‘Nevertheless, we continue to believe that a small rise in house prices of around 2% is more likely than a decline over the course of 2017, since low borrowing costs and the dearth of homes on the market will continue to support prices,’ he added.
However, Alex Gosling, chief executive officer of online estate agents HouseSimple, believes that a stable January is no bad thing and the housing has actually stood up remarkably well in the face of some pretty strong economic headwinds.
‘In fact, if you look at where average prices are today compared to June 2016, when the country voted to leave the EU, prices are actually higher. Attention will inevitably turn now to Article 50 and the uncertainty not just around when the Prime Minister will trigger Article 50, but what will happen when it is triggered,’ he said.
‘The good news is that the housing market is in as strong a position as could be expected to withstand what lies ahead. And while mortgage rates remain low, and the labour market strong, there’s no reason to think buyers will run for the hills. The next few months will be crucial to set the tone for the year, as we enter peak buying season. But then that’s the case every year, with or without monumental news events,’ he pointed out.
‘The key is to ensure complacency doesn’t set in, thinking that the worst is behind us, because the landscape could change very quickly if sales figures are disappointing in the first quarter of this year. But right now, there’s every reason to feel cautiously optimistic about 2017,’ he added.
The severe shortage in stock and available number of homes for sale is the underlying dynamic propping up prices coupled with ultra-low borrowing rates, according to Rob Weaver, director of investments at property crowdfunding platform Property Partner.
‘Estate agents appear to have a dearth of properties on their books and hence demand keeps outstripping supply. And although it’s early days, we expect over 2017 as a whole, that price growth will remain positive,’ he said.
He pointed out that although the market in central London has slowed significantly there are outer boroughs, particularly areas of regeneration and along the new Crossrail route, could potentially see house prices rise once the stations are complete next year and prices in cities like Manchester, Leeds and Birmingham could start to close the North/South divide.
He also believes that buy to let will remain popular despite tougher lending conditions, extra stamp duty and tax changes. ‘Over the long term, residential property price growth and the rental income combined have outperformed most other asset classes,’ he added.
Jonathan Hopper, managing director of Garrington Property Finders, has found that buyers are frequently price sensitive, yet committed. ‘Prices are being supported by the imbalance between demand and supply, but good deals are being done on correctly priced quality homes,’ he said.
‘The modestly improving picture painted by January’s index may well set the tone for the year ahead. On this evidence we will see further price rises, but at a more subdued pace as house price to earnings ratios begin to bite in many parts of the country and restrict price growth,’ he added.