Mixed picture for housing market across the UK

The housing market in the UK continues be marked by a strong regional variation. We review some of the key trends from the housing market at the start of 2018.

Detached house in England
Price growth in the UK housing market increased to 5.2 per cent during 2017, data from the Office for National Statistics showed.

Regional variation in UK housing market continues

Based on Land Registry figures, the report showed the average home price across the country reached £227,000 in December, an increase of £1,000 on the previous month and £12,000 higher than in December 2016. Scotland and SW England showed the biggest percentage rises at 7.7 per cent and 7.5 per cent respectively.Richard Snook, senior economist at PwC, said the countrywide increase exceeded projections made at the start of 2017 and had heightened the “affordability challenge” facing many prospective buyers.“Cumulatively, house prices have increased by 22 per cent more than earnings between 2012 and 2017,” he said. “In terms of regional trends, London prices showed a slight recovery from the sharp fall in November, so the picture is one of a market that has plateaued since the summer. London prices are just 2.5 per cent above their level a year ago.“This effect appears to be spreading to the next most expensive regions, the South East and the East, where prices have been flat since July.”

Unexpected first time buyer boom

However, another report showed the number of Britons entering the property for the first time during 2017 hit its highest level in a decade.The trade association UK Finance recorded 365,000 first time buyers during the year, the highest tally since 2006 and 7.4 per cent higher than in 2016.Paul Smee, head of mortgages at UK Finance, said the figures represented “welcome news for those getting started on the housing ladder”. But he added, “Although the market remains competitive there is no room for complacency, with weaker December figures consistent with our market forecast of subdued growth this year.”
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Halifax report a flattening in the market

That subdued outlook was reflected in the latest Halifax price index, which suggested a “flattening out” in the market in January, with prices dipping 0.6 per cent in January.Russell Galley, managing director, Halifax Community Bank, said, “Annual house price rises have slowed from 2.7 per cent in December to 2.2 per cent in January – the lowest rate since July last year. We’ve seen a monthly decline as well as the quarterly rate of growth flattening out.“Although employment levels grew by 102,000 in the three months to November, household finances are still under pressure as consumer prices continue to grow faster than wages.”Sam Mitchell, CEO of online estate agents HouseSimple.com, commented, “It’s a year to the day since the government published its housing white paper which promised to ‘fix our broken housing market’ but you’d hardly know it from today’s unremarkable figures.“Given the economic environment of on-going Brexit-fueled uncertainty and squeezed household budgets, year-on-year growth might seem like a godsend. In reality, the radical solution to our nationwide housing shortage has yet to materialise. New houses are not being built fast enough as developers drag their heels.”

London house prices freeze

Average London house prices continue to far outstrip the rest of the UK, research by the Lurot Brand reveals the continuing divide in price trends in both Central and Greater London.Jonathan Hopper, managing director of Garrington Property Finders, added, “Property price rises may have frozen to a standstill, but the frost appears to melting fast. Ironically, the freeze is worst in central London – which just a few years ago was the hottest of hotspots.“The capital’s prime areas are seeing a flight of equity that’s sucking the momentum out of price rises and forcing committed sellers to radically lower their expectations.“Nevertheless, on the front line we’re seeing reassuring levels of buyer intent – with those who have resolved to buy pressing ahead despite political and economic headwinds. Against that backdrop, January’s 0.6 per cent month-on-month fall in prices sends a clear message to the market: buyers should be wary of overpaying, and sellers need to be pragmatic in their pricing if they are achieve a sale to Britain’s committed but vigilant buyers.”

Economic changes expected to influence housing market

The mixed picture coming from the market was reflected in this month’s index from the Nationwide Building Society which, in contrast to the Halifax report, said there had been a “surprising” pick-up in annual price growth in January.By the Nationwide’s method of calculation, year-on-year growth accelerated to a 10-month high of 3.2 per cent last month, compared to 2.6 per cent in December.Robert Gardner, Nationwide’s chief economist, said, “The acceleration in annual house price growth is a little surprising, given signs of softening in the household sector in recent months. But activity has been subdued on both the demand and supply side of the market.“The flow of properties coming on to estate agents’ books has been more of trickle than a torrent for some time now and the lack of supply is likely to be the key factor providing support to house prices.“How the housing market performs in the year ahead will be determined in large part by developments in the wider economy. Brexit developments will remain important, though these remain hard to foresee.”

Contrasts in the housing market

According to the latest survey by the Royal Institution of Chartered Surveyors (RICS), the housing market is seeing contrasting trends, with more expensive homes struggling to achieve asking prices and with marked regional differences in price trends.While January saw prices fall in London and, to a lesser extent, in East Anglia, SE and NE England, they went up in NW England, Northern Ireland, Wales and, marginally, in Scotland.Simon Rubinsohn, RICS chief economist, said a lack of properties on the books continued to represent a “major challenge with the number of valuations being undertaken not suggestive of a pick-up in new supply anytime soon”.He added, “Divergent regional trends remain very much to the fore with the market in many parts of the country still actually behaving in a solid if unspectacular way.”
Relocate Magazine Winter 2017 front cover
Read about the future of UK business in the Winter issue of our magazine
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