December 11, 2018
One of the country’s most influential bodies says house price rises over 2019 will be limited to around two per cent – but if the UK crashes out of the EU without a deal, prices will fall modestly next year.
The EY ITEM Club (standing for Ernst & Young Independent Treasury Economic Model) is an economic forecasting group.
Its chief economic advisor, Howard Archer, says: “We suspect that the housing market will remain stuck in low gear over the coming months. Although there are varying performances across regions with the overall national picture dragged down by the poor performance in London and parts of the South East.
“Consequently, we expect that overall house price gains across the UK over 2019 will be limited to around 2.0 per cent, similar to the likely outturn close to 2.0 per cent in 2018. If the UK leaves the EU in March without a Brexit deal, house prices may fall modestly in 2019.”
He says the fundamentals for house buyers are likely to remain challenging next year as consumer confidence is so fragile
“House buyers may also be concerned about further interest rate hikes over the coming months – even if they are likely to be gradual and limited. It is also important to keep in mind that the share of outstanding mortgages on variable interest rates has fallen to a record low around 35 per cent, which is half the peak level of 70 per cent in 2001.
“Housing market activity and prices are also likely to be pressurised by stretched house prices to earnings ratios and tight checking of prospective mortgage borrowers by lenders.
“The downside for house prices should be limited by the shortage of houses for sale. High employment is also supportive for the housing market while mortgage interest rates are still at historically low levels and still will be assuming that the Bank of England does raise interest rates gradually and to a limited extent. The latest RICS survey showed new instructions fell for a third month running in October after a flat performance in July. They have been essentially falling for nearly three years. Consequently, average stock levels on estate agents’ books in October remained mired close to the survey’s record low seen in February 2018.
“Even if ultimately successful, the Government’s recent – and ongoing – initiatives to boost house building will take time to have a significant effect so are unlikely to markedly influence house prices in the near term at least.”
Source – EA Today – Click here for article