House prices in the U.K. increased at their fastest pace in three years in January, according to the … [+]
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House prices in the U.K. increased at their fastest pace in three years in January, according to the latest Royal Institution of Chartered Surveyors’ (RICS) Residential Market Survey.
Perhaps as a sign that a ‘Boris Bounce’ might indeed be in effect, surveyors and estate agents surveyed reported a 17% net balance increase in the house prices in January. Up significantly from the reading of -2% in December last year.
But it’s not a unanimous observation. Some positive readings have also been reported in the latest House Price Indexes from Nationwide and Halifax, with a few caveats:
Nationwide reported a modest annual pick-up in U.K. house price growth to 1.9% in January, up from 1.4% in December. While monthly growth between December and January took a similar step from 0.1% to 0.5% respectively. A rather positive reporting following on from a particularly stagnant 2019.
Halifax also showed very positive annual U.K. house price growth of 4.1% in January, albeit only a marginal increase on the 4% growth demonstrated in December. However, their monthly reporting showed that house price growth slowed to 0.4% in January, down from 2.8% in December.
These reports suggest that market uncertainty remains despite a clearer political path following the election.
A Bounce, Or A Bubble?
Predictions on how U.K. house prices would fare in 2020 following the election vary. The most positive outlooks foresee an increase of up to 5% in 2020 – most notably from the economist Roger Martin-Fagg. Though I believe this is perhaps too optimistic. Most estimates anticipate that house price growth will average around 2% in the year ahead.
Exciting as it can be to jump on trends, it’s early days yet and we should see if this positive sentiment holds in the following months. And as James McKillop of Knight Frank so aptly puts it, this might simply be a ‘champagne-cork reaction’ to Brexit and the election.
I’m looking forward to a positive year for the housing market, but as I’ve also cautioned previously, house prices rarely increase by much in the wake of an election.
Going back to RICS, whilst the fast pace of price growth is an indicator of a recovering market, their own Housing Market Forecast for 2020 also projected house price growth of around 2% for this year, predicting “little change in sales volumes for the year ahead, despite the new certainty around Brexit.”
Final Thoughts
Although I do not anticipate that house prices will sustain the rapid growths witnessed over the past couple of months, there is encouragement to be taken from their slow but steady incline. It reflects market stability and resumed confidence that such stability will remain for the time being.
But expect to see the recurring issues of affordability and stock to drag on prices later in the year; especially in the latter months, when the end of the Brexit transition period on December 31, 2020 reveals whether there’s light at the end of that tunnel.