UK housing market set for a mixed 2018

The UK housing market is set for a mixed performance in 2018 according to the Rightmove house price index. Analysts are expecting the emergence of a “two tier” housing market in the UK which is a growing reflection of the very different valuations afforded to the lower and middle sector housing markets compared to the more affluent areas. Some might call this a “flight to value” but there are a number of issues to consider when looking at the UK housing market.

Average house price growth

New builds in the lower to middle housing sector are expected to increase in value by around 3% in 2018 with second stepper properties forecast to rise by 2%. When you compare this to a predicted fall in London and more affluent areas of around 2% it equates to an average 1% increase in property prices across the UK.

In reality we have seen the emergence of a two tier UK housing market over many years with prices in London and the South of England significantly outperforming the rest of the UK. As concerns continue to grow about Brexit negotiations and the short to medium term outlook for the UK economy it is perhaps no surprise to see properties towards the more affluent end of the market coming under pressure.

House price performance in 2017

As we approach the end of 2017 it looks as though December will post a fall of 2.6% in property prices which is significantly greater than the average December performance of 2.1% over the last seven years. All in all house prices are expected to have increased by 1.2% during 2017 with a further reduction in the growth rate down to 1% in 2018. There is no doubt that areas towards the North of England have started to come into their own during 2017 on a relative comparison with prices in London and the South of England. It seems as though a lack of supply and buoyant demand in the North will continue well into 2018 and offer a significant degree of support.

It will be interesting to see how London property prices end 2017 as we have seen some pretty dire predictions for the end of the year and into 2018. In many ways these predictions are heavily dependent upon the outcome of Brexit negotiations which will impact the London economy and employment opportunities in the south of England more than anywhere else in the UK. Whether we see any rebound in the next 12 months remains to be seen with experts predicting yet more volatile negotiations between the UK government and its European counterpart.

Is it the right time to increase new housing stock?

While some are suggesting that Rightmove has been a little cautious on its predictions for the end of 2017 and into 2018, who could blame them? We have subdued wage inflation, low unemployment but concerns about the short to medium term outlook, financial giants talking of leaving London while others view Brexit with a greater degree of confidence. While it looks as though first phase Brexit talks have been relatively successful each day brings new challenges for the UK government, European counterparts and the UK economy. It is difficult to forecast with any degree of certainty where the UK economy will be in 12 months which makes predicting the direction of the UK housing market even more difficult.

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