Wells: 01749 671172 | Chew Magna: 01275 333993 | Auction Rooms: 01749 840770

Wells & Professional: 01749 671172
Chew Magna: 01275 333993
Auction Rooms: 01749 840770

it should come as little surprise that the national housing market is becoming increasingly subdued with the latest RICS UK Residential Market Survey confirming that enquiries, sales and new instructions have all fallen further over the past month. Demand for properties has actually weakened over the past six months as concerns over the potential impact of Brexit has led to increased hesitancy alongside affordability constraints in parts of the country. That said, whilst short term expectations are downbeat, there are positive vibes regarding the market over the next 12 months.

 

Back in 2016, the average house in England was increasing in value at a rate of 8% and house price growth has steadily fallen since then to between 2 and 3% with a rate of 2.6% seen during 2018. At the start of the year, the average outlook from property industry pundits was that house prices would increase throughout 2019 modestly by 0.8% but actual growth so far this year has been in negative territory with values actually falling in some parts by as much as 1.5%. London has struggled, in particular, with values having decreased over the past six months due to Brexit uncertainty, the impact of tax and regulatory changes as well as lower net migration from the EU. The average UK house is now worth in the region of £230,000.

 

The expectation is that the number of sales will fall over the next few months with the mid and high value sectors of the market likely to be particularly affected by the continuing uncertainty. Whilst it may not be the right thing to do, buyers and sellers are likely to choose to sit on their hands and to judge what to do once the impacts of Brexit are known and confidence returns.

 

There is a wide variation in views on what may happen to house values in the event of a no deal Brexit. The Bank of England have predicted that the worse case scenario could lead to prices dropping by as much as 35% but what may actually occur is far from certain and the industry is sceptical that the fallout will be that bad and there are no signs that similar problems are going to be experienced to those seen in the 1990s when values fell by 25% or in 2007 when a decline of 15% was experienced.

 

Values have been supported by the lack of properties on the market and the number of new properties built still falls well short of the Government target that 300,000 homes are built each year. In 2017, 160,000 properties were built and in 2018, this fell marginally to 159,000. With market concerns and difficulties in obtaining suitable labour, it is difficult to see developers stepping up the supply of houses onto the market.

 

Of course, Brexit could lead to other issues which may have an impact on demand and supply. Mortgages may be more difficult to obtain and the impact on interest rates is uncertain. Monetary policy could be loosened to help stimulate the economy or rates could be increased to protect the value of sterling. If unemployment rises then this could lead to mortgage arrears and forced sales. With control in the hands of our political masters, no one can predict what decisions will be reached and what the implications may be. We remain in uncharted territory.

 

Whatever happens, however, uncertainty will be removed and confidence should return to the economy at some stage. There is an increasing feeling that pent up demand for housing is forming, if not bubbling under the surface, and that this will be released once there is clarity around the UK position in its relationship with the EU and there is more certainty on the way forward for the economy.  Industry pundits have been heard to say “uncertainty is bringing with it opportunity” and “if you want to live there long term, buy now” and they may well be right. Buying now on a fixed rate mortgage may just deliver the right property for you and security for the future and insulate you from the trials and tribulations that may be seen in the short term as well as any future increases in property values. Vendors may be better to sell now and move for similar reasons.

 

In the rental market, with a continuing lack of housing stock, it seems that rents will continue to rise and landlords will continue to fare well. This is in spite of increasing regulation, higher tax payments and lower tax relief on mortgage payments. Some investors are gaining confidence and there is increasing interest in buy to rent properties.

 

So overall, the housing market is on a “steady as she goes” path with uncertainty on where it is heading in the short term. Will it be onto smoother waters or over a cliff edge? No one can predict but it is more certain that the market will recover relatively quickly as confidence and certainty returns.

 

 

RICS Rightmove Zoopla Primelocation The Property Ombudsman