What is the housing market really doing now?


Current figures show the average UK house price is now £232,574. House prices in September 2019 were 1.1% higher than in September 2018 – but they dipped compared with August.  This is a rise, but it is the smallest since April 2013. More important, it is below the rate of inflation – meaning that the value of property is falling in real terms.

According to the Halifax house price index, this indicates annual growth of  just 1.1%, its weakest in six and a half years. According to the Office for National Statistics the figure was 1.3%.

At Continuum, we help clients across the UK buy homes and investment property.  We look at what is behind these figures – and at what they mean to your property plans.

Why has the market flatlined?

Confidence is crucial when it comes to property deals. People ready to make a move may prefer to sit tight when they are concerned about the economy and their own financial prospects. The loss of faith in the market may be partly down to the Brexit-related uncertainty who knows?

In the three years since the vote there has been a reduction in the number of homes being put up for sale, homes taking much longer to sell and a decline in annual house price growth as the negotiations between Britain and the European Union have dragged on.

As a result, first-time buyers may be holding off because they are unsure of the impact Brexit will have on the property market. The same factors may be deterring existing homeowners from moving up the ladder, and any decision to stay put may be confirmed by a lack of demand at the bottom end which makes it harder to find buyers.

Research suggests some owners have even chosen to sell and move back into rented accommodation, gambling on a house price crash.  If prices fall substantially, this strategy could help them avoid the risk of paying too much, but it would be a costly gamble if prices recover. Money spent on rent is effectively thrown away as it is handed to a landlord rather than being used to pay down the mortgage debt.

Markets in the North and Midlands are supporting the annual growth in prices. The South and London are where the largest falls may be found.

So, what happens now?

Price movements across the county are not uniform. In some regions house prices are certainly falling, but others are still be on their way up, albeit slowly. Regions where prices were lowest have shown the most gains in the past 12 months. Areas where prices were at their highest, and especially in and around London where prices could be described as overheated seem to show the largest falls.

But if the Brexit uncertainties are behind a stalled housing market, what might happen once Brexit goes ahead?

None of us have a functioning crystal ball, but it is safe to say that there will be an impact. The Bank of England has indicated that the next change in base rate might be down rather than up, which means that the cost of a mortgage may remain low.

If there is a post-Brexit upturn, this could provide the conditions where buyers flock back to the market and the housing market stages a rapid recovery.

If the impact of Brexit includes a sustained spell of readjustment, the recovery may take a little longer – but the factors underlying the high price of housing in the UK remain.

There is a steadily growing population, and there will always be demand for homes within easy reach of business and employment centres.  People want to buy rather than rent – but everyone needs a roof over their head.

It might still make sense to buy your home, and possibly to buy as an investment too. The important thing is to get the best mortgage deal that you can, which will help ensure that your property stays affordable, whatever direction the market takes

At Continuum we have several ways to help:

  • We can look at buying a property with you and see how it could affect your long-term financial position.
  • We can help you understand the impact if prices fall, as well as if they rise.
  • We can help you integrate house purchase into your overall financial planning
  • We can also help you get the very best mortgage deal. With many lenders competing for fewer new borrowers there could be bargains to be had.

Whichever direction the market takes next, you could be better off with expert help from the Continuum team.

It may be difficult to sell or realise the investment, or obtain information about its value, or the extent of the risks to which it is exposed.

The value of property investments and income from them can go down as well as up and investors may not get back the amount originally invested.

As property is a specialist sector it can be volatile in adverse market conditions, there could be delays in realising the investment.

Property valuation is a matter of judgement by an independent valuer therefore it is generally a matter of opinion rather than fact.

Past performance is not a guide to future performance and should not be used to assess the risk associated with the investment. 

Your home may be repossessed if you do not keep up repayments on your mortgage.

The information contained in this article is based on the opinion of Continuum and does not constitute financial advice or a recommendation to suitable investment strategy, you should seek independent financial advice before embarking on any course of action.

Book a free initial consultation

Book an initial consultation with one of our independent financial advisers or call us on 0345 643 0770 if you would like to discuss further.

 

References:

https://www.independent.co.uk/news/business/news/house-prices-uk-brexit-annual-rise-monthly-fall-halifax-a9145771.html

https://www.telegraph.co.uk/personal-banking/mortgages/certainty-brexit-deal-will-reverse-britains-housing-market-slump/

https://www.independent.co.uk/news/business/news/brexit-no-deal-latest-house-prices-uk-forecasts-a9156911.html

https://www.halifax.co.uk/media-centre/house-price-index/

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