House price predictions – 2018
Predicting property prices and interest rates is notoriously difficult, and never more so than this year, when economic and political uncertainty still dominate the headlines.
But there are plenty of pundits willing to have a go.
We round up the views from the experts on the UK property market and house prices next year:
The UK housing market in 2017 followed a similar pattern to the previous year. House price growth has slowed, whilst building activity, completed sales and mortgage approvals for house purchase have all remained flat.
This is driven by a combination of the continuing uncertainty regarding the future of the UK economy, and the ongoing challenge for prospective buyers to build up the appropriate deposits to support purchases.
On the flip side UK house prices in general are likely to be supported, seeing modest growth in 2018, through the combination of a shortage of properties for sale, continued low levels of housebuilding, low unemployment levels and finally good levels of affordability due to the low interest rate environment.
Despite the recent rate rise we do not expect this to have an adverse impact on transactions. A further rate rise is not seen as imminent and we may not see one until the latter part of 2018, if at all.
Overall, we expect annual house price growth nationally to stay low and in the range of 0-3% by the end of 2018. The main driver of this forecast is the continuing effects of this year’s squeeze on spending power as inflation has outstripped wage growth and the uncertainty regarding the prospects for the UK economy next year.
Price growth across the UK is expected to be 1.0% in 2018, reaching 14.2% cumulatively between 2018 and 2022.
In London, prices are forecast to fall by 0.5% in 2018, but cumulative price growth over the next five years is positive at 13.1%
The momentum in house price growth is slowing in many parts of the country, and we expect price rises to remain muted overall next year amid increased economic and political uncertainty in the run-up to Brexit and amid more muted forecasts for wage growth.
The market is localised and we see slightly stronger growth in the Midlands, East of England and the North West, a continuation of the trend that has emerged this year.
Once the Brexit deal is completed, we forecast rising momentum across the market, with price growth reflecting this in many locations. The variations currently observed in the prime housing markets in London and beyond are set to continue.
The UK may now be entering a period of interest rate rises, but even so, we expect rates to be low compared to long-term norms by the end of the forecast period.
While development levels are rising across the country, the shortage of new homes is unlikely to be fully reversed in the coming years, and that will underpin pricing. On the other hand, factors such as deepening affordability pressures and property taxes, will continue to weigh on pricing.
NAEA Propertymark (National Association of Estate Agents)
It’s been a big year for the housing market, with the Government pledging to improve the house-buying process, and Stamp Duty relief for first-time buyers coming into effect.
However, looking ahead to next year, more than half of our members don’t think the first-time buyer tax relief will have a real impact on the number of sales being made to the group.
Further, agents expect supply to remain the same but demand to grow which sounds like bad news, but if we can improve the process of buying a property, we’ll be making vast improvements to the sector which will ultimately make it easier and provide more certainty for first-time buyers.
Our members want to see Stamp Duty relief rolled out nationally to all buyers, and hold out hope that housing stock will increase. This will be a case of ‘wait and see’ – the Government has made many such promises in the past which we’ve never seen translated into reality.
Overall, we expect house prices to be broadly flat in 2018, with perhaps a marginal gain of around 1%.
Over the longer term, once the economy regains momentum, we would expect house prices to rise broadly in line with earnings (around 3%-4% per annum), though if the rate of house building fails to keep up with population growth, prices may outpace earnings once again, as they have in recent years.
The UK housing market has been characterised by significant regional disparities in house prices in recent years and it is not clear how Brexit will impact these dynamics. Much will depend on the nature of the Brexit impact on the UK economy (in terms of its impacts on different sectors and the resulting geographic consequences).
For example, if the financial sector is adversely affected, then the London market is likely to see more of an impact, while if manufacturing firms are disadvantaged, other parts of the country may be more negatively affected, even though valuation metrics appear less stretched.