Prediction: UK property price ‘obsession’ set to end
Meagre property price inflation in the medium term could bring to an end the nation’s “obsession with house prices”, according to a new report from Oxford Economics.
The report predicted that house prices would grow at around three per cent per annum over the next couple of years.
This would be just half the pace averaged since 2000 and may be enough to stifle our preoccupation with the value of our homes, the report’s author, Martin Beck, suggested. In the research briefing, Beck argued the odds of house price growth breaking out of its current weak trend were “remote”, noting that continued low interest rates and the current rate of housebuilding would serve to provide a floor for prices.
Beck also noted that even in the event of a no-deal Brexit, it was likely that the Bank of England would take action, such as cutting base rate again, which would only serve to prop up house prices.
The most “concrete” threat to price growth is the closure of Help to Buy according to Beck, who noted that the scheme has supported three per cent of transactions since its introduction.
He continued: “The House of Commons Public Accounts Committee recently concluded that 60 per cent of buyers who took part in the scheme did not need its support to buy a property, implying that the scheme has had a bigger effect on prices than a more precisely targeted initiative. Although somewhat out of date, the price boost from the scheme was estimated at around three per cent back in 2015, a number likely to have risen since.”
Beck concluded that with affordability stretches and borrowing costs likely to climb, albeit modestly, “the ingredients for sustained rapid price growth are sorely lacking”.