10/04/2018

There were mixed messages from lenders and estate agents on house prices for March. The Halifax, which is the country’s largest mortgage lender, said that prices rose by 1.5%, while the Royal Institute of Chartered Surveyors said that prices remained unchanged for a second consecutive month, and the Nationwide said that growth had slowed compared to February.

In all cases, figures are still lower than before the 2016 Brexit referendum, and the slowdown has been blamed on the value of the pound dropped, pushing up inflation. However, a shortage in houses on the market means that most lenders and economists believe that there will be a continued push towards higher prices across the board, but this will be pegged at between 2% and 3% increases, which are modest gains when compared to the 10% increases that had become commonplace before the referendum.

Halifax

The Halifax is the UK’s largest mortgage lender, with approximately 15% of market share as part of the Lloyds group. They reported a 2.7% increase in the first three months of the year, to March 2018. This follows what was the weakest three month increase to February 2018.

The month of March, alone, saw an increase of 1.5%, which is the largest monthly gain in 6 months, but the building society has tempered expectation of further, significant growth, pointing to a weak pound as counteracting the lack of new homes coming on to the market.

The Halifax has said that they expect annual growth of around 3%, which is still significantly lower than the 10% that they were reporting prior to the country’s Brexit referendum in 2016. The increases beat expectations of the Halifax and economists.

The Nationwide

However, the news from Nationwide, which is the country’s second largest mortgage lender with 14% of market share, painted a different picture. They reported monthly growth of 2.1%, which was down on February’s 2.2% increase. They also reported that London was the only region of the country where house prices had actually dropped. The rest of the country saw modest gains. Prices in the capital fell by 1% while Welsh property prices rose 6.1%, but the highest increase came in Northern Ireland, where prices rose by 7.9%, but still remain well below their peak of 2007.

London prices have experienced a prolonged cooling down period, but this represents a significant decrease across the portfolio of property values.

The Nationwide said that they expect house prices to rise an average of 1% for the year. They said that low unemployment and a lack of new properties would help prevent lower increases, but also pointed to the poor performance of the pound as being the reason that prices would not escalate further.

RICS

Meanwhile, the Royal Institute of Chartered Surveys UK Residential Market Survey, which is a monthly survey of the market, highlighted that house prices remained unchanged for the second consecutive month in March. The survey also pointed to another drop in buyer demand for the 12th consecutive month.

In terms of specific areas, the survey showed prices fell in London and the South East but rose in the East Midlands and Northern Ireland.

Survey respondents said that they expected prices to remain stagnant in the next three months, but that they were expecting an increase in the 12 months from the date of the survey.

Influencing Factors

Mortgage lenders and economists continue to point to Brexit as being the primary sentiment behind the stagnating market. The pound traded at approximately $1.50 before the vote, and despite reaching a post-Brexit peak of $1.40 in January this year, it is now trading at $1.35. A weaker pound means less spending, including on mortgages, and this has been witnessed since the UK voted to leave the EU.

Despite uncertainty over the pound, however, there are some positive signs that are helping the housing market. Unemployment levels are currently very low, which means that a higher portion of the population have salary to spend on housing.

Another factor that has a marked influence on housing market prices is the number of properties on the market. Currently, there is a lack of new properties entering the market. Lower supply pushes prices upwards, which is another factor helping to counteract the reduced demand.

Future Prospects

With the continued economic uncertainty of where the country is heading, and how it will handle the actual departure from the EU, optimism is difficult to find in the housing market.

Most lenders expect house price growth during the year but are predicting prices will only increase between 1% and 3%. This is considerably lower than the 10% increases that were being reported prior to 2016’s referendum, and as long as there is uncertainty over Brexit and where it will leave the country’s economy, the housing market will find it difficult to make marked gains.

What It Means For Landlords

The news is a mixed bag for landlords. Fewer properties coming onto the market means that there is less supply, but the slowing in price growth means that those properties that are on the market are more affordable. As such, landlords that are looking to expand their portfolio can pick up some real bargains if they know where to look and how to get the best prices.

Fewer buyers also means that more people are renting, and this is obviously beneficial to landlords that are looking for tenants.

PDF Estates

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