2018: UK property market predictions

Posted on: 20th January 2018 in Mortgage & Property

What to watch out with UK property prices in 2018? The one thing practically to watch out for is rising interest rates; many buyers of UK property are focussed on getting a fixed rate mortgage deal in place now to protect against the base interest rate going up in the near future. Data published by the Bank of England shows a steady rise in rates is planned until the beginning of 2021, when the base rate is planned to stand at 1%. That might not sound much but interest does the damage over the long-term – so small rises mean big changes to your monthly bill. 2011-2018: A good run for UK homeowners! Figures from UK estate agents Rightmove suggest that UK home-owners have seen the price of their property go up by almost 5% for the last seven years. Miles Shipside, Rightmove Director, summarised figures from the December 2017 Rightmove house price index by concluding that, “home owners have had a good run, with every year since 2011 seeing a rise in the price of property coming to market, and the national average rise over those six years being 30.9%, equivalent to 4.6% per year.” But what about UK property prices in 2018? The consensus is …. well, as usual, there is little consensus to be had on the future for the UK property market! – Other than there’s likely to be a general slowing down of prices, with Brexit continuing to keep buyers and sellers guessing. The short-term “2018 will continue the 2017 trend by being a real mixed bag of different price pressures both up and down, but the net result is that we forecast another year of a slowing in the pace of price rises.” Said Shipside of Rightmove. On the positive side, estate agents Savills expect UK property prices to rise by 1% this year, and Rightmove figures indicate a rise of 3% in the price of First-Time Buyer properties. PWC predict an average price increase of 3.9% for UK properties in 2018. PWC say that the rise in the base interest rate in November 2017 from 0.25% to 0.5% will not act as brake in the market. On the less positive side, “following a pretty lacklustre finish to 2017, the indications are that momentum across the housing market will be lacking as 2018 gets underway,” says Tarrant Parsons of the Royal Institute of Chartered Surveyors/RICS. RICS has predicted that UK property prices will be flat this year, “dampened by factors including stamp duty, political uncertainty around Brexit, and a lack of housing stock.” (ukbusinessinsider.com) Lucian Cook of estate agents Savills agrees that, “uncertainty over what Brexit means for the UK economy and how it will impact household finances will increasingly act as a drag on house prices.” First-time buyers are warned to not expect too much from Government measures in 2017 to make getting on the housing ladder easier. Many experts are agreed that the UK Government’s attempt in November 2017 to stimulate the housing market with new Stamp Duty exemptions for First-Time Buyers will have no impact – with no effective reduction in cost being passed onto buyers because the properties in question will continue to be expensive owing to the continued under-supply of new homes in the UK (as well as for other reasons). The long-term Whilst Brexit uncertainty may be dampening the market in the short-term, the undersupply of housing in the UK in the long-term is agreed to be a powerful influence in supporting high property prices. Fionnuala Earley, Chief Economist of estate agents Countrywide, says that, “in terms of house prices, the lack of supply in the face of growing household numbers over a number of years will support the level of prices.” Estate agents Savills say, though, that UK property prices will effectively halve the rate of their increase over the next 5 years. A growth of only 14.2% is expected for the five-year period 2018-2022, compared to a historical rise of 28% for the previous five years. Still – if you want proof that property is worth it in the long-run, there it is! Even when property isn’t doing brilliantly, it’s still making homeowners money. A two-tier UK property market for 2018? Some pundits see a “two-tiered” property market for the year – with price rises continuing in lower and middle areas of the market, but prices are set to drop slightly at the top end of the market. Figures from Rightmove forecast that, at the lower end of the market, typical FTB homes will cost 3% more this coming year, with second homes costing on average 2% more. At the top end of the market, large family homes in London’s commuter belt are expected to fall in value by 2%.