The latest house price research from Halifax shows that house price growth in the UK has fallen by more than 50% to a four-year low. This may seem a depressing fact but when you compare the UK market to overseas property markets, and consider the confusion surrounding Brexit, is this really such a this appointing performance?
UK property prices
In the year to March 2017 UK property prices increased by 3.8%, the smallest annual increase since May 2013 although still well above inflation. This figure does not compare favourably to February which was 5.1% and a peak of 10% in March 2016. As a consequence the average house in the UK now costs £219,755. While there are concerns about the slowing rate of growth in UK property prices, they are still expected to move forward in the short to medium term.
The UK market has come in for significant attention in light of the Brexit move but, aside from the luxury end of the London market, UK house prices have remained steadfast. Experts have tried on numerous occasions to talk down the market but to no avail. While the most recent annual growth rate of 3.8% is well down on recent figures let’s not forget the market is still moving forward, both in actual and in real terms.
There are a number of factors which have impacted the UK housing market in the short to medium term. One of which is the rate at which household incomes have grown compared to house prices. The UK is not alone in experiencing economic turbulence and as a consequence household incomes have not managed to keep pace with the increase in house prices. Therefore at some point, we may well be at that point, the affordability factor comes into play which will reduce demand for property and soften price growth.
Low supply levels
The supply of suitable properties to the UK housing market, not to mention new homes, is currently at a relatively low level. This means that there is increased competition for the properties which are available therefore prices are unlikely to fall back too far in the short to medium term. If we also take into account historically low mortgage rates it is difficult to see the UK housing market suffering a major setback.
Of course there may be growing concerns about Brexit negotiations as rumours and counter rumours circulate the market. At this moment in time nobody really knows how the UK will be impacted in relation to trade with Europe but in a worst-case scenario it would revert to WTO regulations. It is also worth noting that while the UK does significant trade with the European Union the European Union does a greater level of trade with the UK public and business community. So, Brexit negotiations will impact the UK property market but should they really be able to drag down the market in the medium to longer term?
Some markets within Europe would give their last Euro to have a housing market as buoyant as that in the UK. It is somewhat ironic that the UK is being seen as dependent upon Europe with regards to trade when in reality the European economy as a whole is in a mess. In light of the Halifax report it is worth noting one of the conclusions, UK property prices are likely to move forward for the foreseeable future with little likelihood of a downturn. Is that really so bad?