A new report out today suggests that the average UK home is now worth a staggering £317,000. The report by property site Rightmove also casts a very interesting light on school catchment areas becoming more popular. In the four weeks to 13 May 2017 the average asking price for a home in the UK increased to £317,281. This is a new peak for UK house prices and while there is some uncertainty about the second half of 2017, the market does seem to be relatively well supported.
The report also suggests that families with children under the age of 11 were twice as likely to be moving house as the average family in the UK. It seems as though parents are now looking for larger properties within good-quality school catchment areas which has pushed local property prices higher. In a further interesting development, a typical three/four-bedroom family home (excluding detached properties) is now going for £270,953 which is a 5.4% year-on-year increase.
The impression is that families are more concerned about the education of their children as opposed Brexit and the forthcoming general election. Travelling time to school is also a major consideration for many families and access to local amenities. Even though family finances are under pressure, with inflation rising and wage inflation relatively low, the short term pain is seemingly less of a concern compared to the long-term gain.
Will momentum continue in the UK housing market?
When you consider that the price of three/four-bedroom family homes increased by 5.4% over the last 12 months there would seem to be underlined demand for UK houses. This momentum is also helping to push the overall average UK house price further ahead beating last month’s increase of 1.1%. We sometimes forget that historically low interest rates mean many people have access to relatively low cost finance. When you also take into account the never-ending shortage of new build UK housing stock perhaps it is no surprise to see that property prices are still moving ahead.
Some experts are suggesting that the second half of 2017 could see momentum fall away in light of not only Brexit but rising inflation and subdued wage inflation. The problem there is that the real value of wages will fall unless wage inflation suddenly jumps to that of underlying inflation. At this moment in time that is highly unlikely although the Bank of England does expect inflation to fall back in the short to medium term.
Is this all guesswork?
Even though many economies have recovered from the 2008 US led worldwide economic downturn it is worth noting that we are still not “out of the woods”. As nobody alive had experienced anything like the 2008 downturn the same can be said of the ongoing gradual recovery. Central banks around the world are still using quantitative easing as a means of maintaining liquidity in financial markets but at some point this will need to end.
At the end of the day housing market will take in the pros and cons of the current situation re-evaluate the long-term implications and arrive at a fair value. The so-called experts can wax lyrical all they like but it will be the markets which dictate the long-term direction of UK property prices.