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What will happen to property prices in 2018?

Property prices have remained resilient this year in the face of economic uncertainty and the looming prospect of Brexit.

Housing has been a hot topic in 2017, with a first-time buyer stamp duty axe in the Budget, landlords seemingly being targeted by the Government and focus turned on the number of homes being built.

As 2017 draws to a close, annual inflation has slowed this year, but according to the three main indices, values are still up on a year ago.

We round up some of the recent prediction from the experts – and invite our readers to make their own predictions for 2018.

Sunny outlook? Will house prices continue to rise in 2018 – or will they begin to decline?

Halifax, Nationwide and ONS

In the last year, This is Money has kept a close eye on the monthly indices from Halifax, Nationwide and the Office for National Statistics, which focus on sold prices.

According to Nationwide, the average home in November 2017 was £209,988, Halifax £226,821, and the ONS figure for October 2017 (it lags a month behind the others) shows a price of £223,807.

It means in the last year, Nationwide says a typical home has grown £5,041 in value, Halifax £8,006 and ONS £8,791 – or an average of £7,279.

Will the price rises continue? Russell Galley, Halifax managing director says: ‘Overall, we expect annual house price growth nationally to stay low and in the range of 0-3 per cent by the end of 2018.

‘The main driver of this forecast is the continuing effects of this year’s squeeze on spending power as inflation has outstripped wage growth and the uncertainty regarding the prospects of the UK economy next year.’

If house prices did rise three per cent next year on the Halifax index, it would see a typical home add another £7,000 of value.

This year: How house prices have fared in 2017 according to Halifax, Nationwide and the ONS

This year: How house prices have fared in 2017 according to Halifax, Nationwide and the ONS

Prices to flatline?

A number of leading housing commentators predict house prices will either remain flat during 2018 or rise by a relatively small percentage.

Poll

Will property prices rise or fall overall in UK next year?

  • Rise 0 votes
  • Fall 0 votes
  • Stay the same 0 votes

A recent poll conducted by Reuters, involving 28 housing market specialists, says that property prices will rise by 1.3 per cent nationally, but fall by 0.3 per cent in London.

During 2017 housing market trends were split geographically, with London experiencing a significant cool-down.

In contrast Manchester and the North West have powered ahead, as prices have become more affordable relative to earnings.

A reflection of the cool-down is the growing number of house sellers who are becoming less confident when demanding their asking prices.

Property website Zoopla says more than a third of homes on the market in November had had their original asking price reduced, marking a 1.25 percentage point increase compared with July. 

Rics: House prices will grind to a halt

Royal Institution of Chartered Surveyors believes house price growth is likely to come to a halt in 2018 across the UK generally, with price growth in some regions offsetting a weaker picture in London and South East England.

Tarrant Parsons, Rics economist, says: ‘From our surveys, activity is quite subdued in most places, although pricing has been more resilient in Northern Ireland, Scotland, Wales and also North West England.’

Rics believes the stamp duty cut for first-time buyers is unlikely to stimulate housing market activity much overall, although it said affordability may improve slightly for the sector.

Manchester: Hometrack says regional cities such as Manchester could see price rises of up to 25% in the next two to three years

Manchester: Hometrack says regional cities such as Manchester could see price rises of up to 25% in the next two to three years

Hometrack: Regional cities to boom while London realigns

Property analysts Hometrack say London house prices typically reached a record of 14-and-a-half times earnings in October.

Richard Donnell, insight director at Hometrack, adds that house prices in the capital have surged by 70 per cent since 2009.

He said: ‘In contrast, regional housing markets and cities outside the South East have further potential for material price increases as affordability is still attractive.

‘In fact, large regional cities could register price rises of up to 25 per cent over the next two to three years.

‘The likes of Manchester, Birmingham and Glasgow have seen market activity increase and this has delivered above-average price growth of six to eight per cent for the last 12 months.

‘London is facing a drawn-out period where house prices and earnings need to realign.’

Sarah Beeny: The owner of online estate agent and TV presenter believes prices will rise next year - but their may be some monthly Brexit blips

Sarah Beeny: The owner of online estate agent and TV presenter believes prices will rise next year – but their may be some monthly Brexit blips

Sarah Beeny: Prices will rise 2-3%

Sarah Beeny, owner of online estate agent Tepilo said: ‘The property market has held steady in 2017, with prices up on 2016 despite rising inflation, political uncertainty and a small increase in interest rates, which proves its robustness.

‘I expect to see more of the same in 2018.

‘I predict prices will rise around two to three per cent over the course of the year, although we may see some monthly blips as Brexit negotiations get into full swing.’

Savills: House prices to rise next year – except for London

According to estate agents Savills, house prices will fall two per cent in London next year – but all other areas will see a slight increase.

As part of its five year predictions, Lucian Cook, Savills head of residential research, said: ‘Uncertainty over what Brexit means for the UK economy and how it will impact household finances will increasingly act as a drag on house prices.

HAVE YOUR SAY

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‘There is capacity for growth once we have greater clarity, but this will be constrained by rate rises and the corresponding ability to get mortgage debt, particularly in London and other higher value locations.

‘Mortgage regulation, introduced in 2014, is likely to show its hand as interest rates rise. But by restricting the amount people can borrow, it will take the heat out of the market and so reduce risk now and in the future.’

Property expert: End of 2018 will be like quicksand

Henry Pyror, an independent property expert, told This is Money: ‘House price forecasts only exist to make astrology look credible but for what it’s worth I think that London house prices will sink lower in 2018 falling on average by another five per cent while nationally prices will be pretty flat.

‘I expect the UK house prices to end up two per cent lower in 12 months’ time. The quicksand in 2018 will be towards the end of the year, I fear.

‘Who is going to want to commit to their biggest single purchase in the six months leading up to our departure from the EU in March 2019?

‘Many buyers will wait until the dust settles and whilst there may be little practical difference having concluded our divorce this may not be reflected in the housing market.

‘In the second half of 2017 we have seen sellers start to appreciate the shift from a sellers to a buyers’ market.

‘It looks like agents earlier optimism in the spring has been found wanting with buyers often now holding the whip hand.

‘Half of all homes on the market aren’t selling and over 70 per cent of those that are selling are being agreed below the asking price suggesting that prices may well sink further in 2018.

‘Mortgage lending has held up well thanks in large part to brave first time buyers who have been encouraged by initiatives like Help to Buy but clearly we are now pushing up against affordability issues with lenders having to offer longer terms and products using the help of parents and grandparents.

‘It would be good to see some of the big discussions around housing develop into active policy in 2018.

‘Sorting out the mess that surrounds leasehold properties, sharpening up the rights of tenants, bringing more rigour and discipline to the process of buying and selling would all help.

‘The public have given politicians one last chance to sort out the national housing crisis and they are unlikely to be very forgiving if action doesn’t follow on the millions of words.

‘In summary, I expect that buyers will become bolder next year and the most successful sellers will be those who listen to the advice of the best agents.

‘Too many people will make the mistake of thinking that this is still the market we had in 2016, that they can buy and sell on their own and many will get caught out.

‘Even now, a third of homes on the market have had to reduce their asking price at least once and over half of homes listed in swanky Mayfair and Belgravia has been in the market for over a year.

‘There is a market. There will be one in 2018 it just won’t be the same as the one we had a year ago.’

Liverpool: Could be a good investment in 2018 as prices are still below their peak

Liverpool: Could be a good investment in 2018 as prices are still below their peak

Belfast and Liverpool good investments? 

Henry Sherwood, of the Buying Agents, said: ‘The growth in the South has already slowed but Midlands and northern cities have seen around six to eight per cent this year.

‘Much of this, especially in Manchester has been fuelled by investors leaving London so there could be a potential bubble forming but house price to earnings ratios are averaging around six times.

‘It is not critical yet so you may see more growth at this level for another year or two.

‘I think Liverpool and Belfast could be good investments as currently seeing good steady sustainable growth but prices are still below what they were at peak. Belfast prices are still around per cent less than peak and only four times average income.

‘I don’t know anyone in property that would not like to see the three per cent second home tax abolished but can’t see it happening.’

Congratulations to our reader experts…

Last year, in our annual round-up of house prices, a huge 4,490 This is Money readers voted in a poll on what they believed values would do in 2017.

Two in five said 0-5 per cent, which is bang on the money. According to our calculations, the typical home in Britain is £220,205 (using the Halifax, Nationwide and ONS figures as a benchmark).

This is £7,279 higher than a year ago – and means prices are up 3.3 per cent on average. 

 



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