Property outlook: The UK housing market in 2018 and beyond
As we approach the end of an eventful 2017, we look ahead at the UK property market. What do leading experts think the New Year, and the short to mid-term future, will bring?
As expected, the landscape post-Brexit features strongly. There is general agreement that growth in central London real estate prices will slow, with the outer boroughs and several regions faring better. Rises in mortgage interest rates, however gradual, will also be an important factor looking a little further into the future.
PwC UK’s view
The professional services firm raises several key points in its ‘UK Housing market outlook’, published in July 2017. The consulting firms predicts that growth in London house prices will continue to slow, estimating a 3.8% increase in 2018. That’s a percentage up on 2017’s estimated 2.8% figure (and more positive than initial predictions following the UK’s vote to leave the EU). Outer London boroughs, rather than prime central areas of the capital, seem to be performing best, notably north east London. Given average house price increases in London of over 60% since 2007, many would argue that a slowdown here was inevitable. The average house price in Westminster today, for example, is over a million pounds.
Elsewhere, the East and Southern regions of England are expected to continue to grow above the UK average. Essex is identified as a key hotspot. PwC believes this is probably because house prices in the county have been lower than those in commuter towns west of London. Properties within the commuter belt of the UK’s fastest growing cities also look promising.
While house price growth is expected to slow in the medium term compared with recent times, the price-to-earnings ratio is still increasing. The sheer demand for houses will continue to outstrip supply, with the government’s plans to build more than a million homes by 2020 unlikely to make any real impact here. A further 500,000 new homes are promised by 2022.
PwC UK points to stamp duty reforms for purchasers of buy-to-let and second homes, as well as Brexit, as the main events affecting the market.
Savills’ outlook
In its autumn residential property forecast, the real estate company expects the market to return to growth in 2019–20. It gives increases in employment, wages and GDP as the main factors for this positive trend. The firm sees uncertainty over the UK’s relationship with the EU as a current barrier to growth, along with inflation, which is reducing people’s earnings. Looking further forwards, Savills picks out mortgage interest rate rises, however gradual, as a key market factor.
Savills identifies areas beyond the Home Counties as potential for growth, as well as the North West of the country, especially locations that are well-connected to markets where affordability is stretched.
What the papers say
In late September, The Telegraph reported good times ahead for the most expensive London properties. Prices are predicted to bounce back by 20% between 2018 and 2022. This would recover the 15% fall made since 2014, the paper states. The Guardian recently focused on house price cuts. According to RightMove, reductions in asking prices are at their highest level since 2012. Business Insider UK cites Morgan Stanley’s forecast of ‘a modest housing market [price] correction’ in 2018. The leading financial services firm also points out that a chronic shortage of housing in the market should work against any sustained downturn.
We’ll continue to keep you posted on Property Matters at Gateway Today.
