There has been a noticeable softening of house price inflation since 2016, and that trend is expected to continue through the remainder of 2018 and into 2019, however the overall situation is likely to become increasingly turbulent as the UK exits the European Union. But the overall situation has been impacted by other factors too, particularly with the introduction of the Stamp Duty surcharge on second homes in the April 2016 Budget, which is equivalent to an additional 3% tax on the purchase price of a property which has had an influence on the growth of the market.

The Consumer Prices Index including owner occupiers’ housing costs (CPIH) 12-month inflation rate was 2.4% in August 2018, up from 2.3% in July 2018.  Average house prices in the UK have increased by 3.1% in the year to July 2018, which is down slightly from 3.2% in June 2018. This is the lowest UK annual rate since August 2013 when it was just 3.0% growth. The annual growth rate has routinely slowed since mid-2016 and has remained under 5% throughout 2017 and into 2018. This is expected to continue.

The reasons behind this national slowdown over the past two years is driven mainly by an equal slowdown in the south and east of England, which has, traditionally, been the main area of growth in the UK. The lowest annual growth was in London, where prices decreased by 0.7% over the year, down from an increase of 0.3% in the year to June 2018. The most recent data from the UK Office of National Statistics (ONS) shows that total transactions have fallen from around 75,000 in February 2017 to approximately 64,000 in February 2018, and continues to slow. London – together with the South East of the country – is now the weakest part of the country in terms of house price growth, and is expected to be the case for at least the majority of 2019.

The latest data issued by the ONS shows that there are only slight differences in house price index for different property types, with all types – detached, semi-detached, terraced, and flat – showing some increase, however the greatest increase (4.6%) is shown by the detached variety, with an average price of £352,000. By comparison, flats and maisonettes showed the lowest growth at 0.6% with an average price of £208,000. The reduced growth shown by flats and maisonettes is accounted for by a negative annual growth from these properties in London, which contains around 25% of them in the UK.  These trends are expected to continue with little change throughout the first half of 2019.

The key points that are expected to define the UK property market into 2019 and beyond are:

  • A continued weakening of house price growth to a value of approximately 3% in 2018, which is expected to continue at a similar average rate through 2019 and then further on to at least 2025. On this basis, the average UK house price would rise from the recorded average of £221,000 in 2017 to around a projected average of £285,000 by 2025. Price growth at this level would further mean that the ratio of house prices to average earnings would remain broadly stable, meaning that house sales are likely to continue at a comparable level to 2018.
  • Regional growth will continue to be dominated by England, with Scotland, Wales, and Northern Ireland being significantly lower growth, as has been the case throughout ONS record gathering. However, the regions of best growth within England are likely to change, with the average price growth projected to be in the East of England, the West Midlands, while the North East is expected to lag slightly behind in average price growth. Therefore, most regions will experience moderate house price growth in 2018 broadly similar to the UK average, except for London, where it is expected that house prices could drop by nearly 2% compared to 2017 as this is where affordability has been most stretched.
  • The effects of Brexit are likely to impact property growth during 2019, but how that will manifest is currently subject to speculation and its full effect will not be known until the leave process has been started in March 2019. Therefore, this will remain a huge unknown factor until that time.

Despite a general house price slowdown, home ownership remains a very strong long-term financial asset, along with all of the usual benefits of providing a place of security and stability for a family. Daniel Mumford, Managing Director at Grange Mortgages said: “There has been some turbulence in the market, but the long-term trend is for stability and steady house price growth.”

If you’d like to discuss your mortgage options, get in contact with a member of our team, by calling us on 01604 877999.

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