House price growth set to grind to a halt next year amid Brexit uncertainty and stretched affordability, estate agents predict
- UK house prices to fall slightly in London and the South East in 2019
- But Northern Ireland, North West, Wales and Scotland to see ‘solid’ growth
- BoE’s worst case scenario of 30% fall in house prices is ‘implausible’, says RICS
- UK economy set to slow down next year due to a freeze in business investment and weak consumer demand ahead of Brexit, says BCC
UK house prices are set to stagnate next year and home sales to fall further as Brexit uncertainty and high prices keep more potential buyers and sellers away from the property market, surveyors have said.
The Royal Institution of Chartered Surveyors said that affordability aside – which is still locking many people out of the market and is unlikely to improve next year – political uncertainty appears to be causing hesitancy among buyers.
However, it also said that the Bank of England’s projections of a 30 per cent fall in house prices following a disorderly Brexit were ‘implausible’.
Housing market slowdown: But RICS said a no-deal Brexit was unlikely to cause a 30% price fall
‘Mainly, we would expect the Bank to cut interest rates and potentially restart quantitative easing in the wake of a no-deal. The analysis behind the 30 per cent fall in house prices assumes the policy rate would be hiked to 5.5 per cent,’ RICS said.
‘Nevertheless, a negative shock to the economy resulting from a no-deal outcome, expected by the majority of economic forecasters, would hit incomes and reduce demand for housing.’
The RICS predictions come as the British Chamber of Commerce said the whole UK economy is set to slow down next year due to a freeze in business investment and weak consumer demand ahead of Brexit.
The business lobby said growth was likely to slow to 1.2 per cent this year before inching up to 1.3 per cent in 2019, which would be the weakest growth since the 2009 recession.
‘While Brexit isn’t the only factor affecting businesses and trade, it is hugely important — and the lack of certainty over the UK’s future relationship with the EU has led to many firms hitting the pause button on their growth plans,’ BCC director Adam Marshall said.
Zero growth: RICS expect national house prices to stagnate next year
RICS said leaving the EU with a deal was ‘the most likely outcome’.
But even in this scenario, it expects the number of houses being sold to fall around 5 per cent to 1.15million next year.
That’e because as an expected gradual rise in interest rates would push mortgage rates higher, which would in turn weigh on demand ‘to a certain degree’.
RICS also predict prices to flatline from the middle of next year, but said the picture varies ‘significantly’ across different parts of the UK.
House prices are expected to ‘pull back slightly’ in London and the South East, mostly because affordability in these regions is overstretched, but they will continue to rise at a ‘solid’ pace across Northern Ireland, the North West of England, Wales and Scotland.
East Anglia and the South West are instead expected to see no price growth next year, RICS said.
‘Further growth in some regions looks likely to offset a negative trend in others, while a broadly stable picture seems the most probable outcome for the remaining areas,’ the survey says.
‘Bringing this altogether is what leads us to expect the national averages for prices to look relatively flat come the end of 2019.’
Stretched affordability: The ONS estimates that house prices are now a greater multiple of earnings than at any other point since records began
It comes as several surveys have consistently pointed to a slowdown in the housing market, with the latest by Rightmove suggesting average asking prices in December had fallen by £10,000 in just two months.
RICS said affordability was possibly the main reason for a slowdown in the market, pointing to official data showing that the average first time buyer now needs an average £33,000 deposit – 71 per cent higher than ten years ago.
‘Such high house prices are shutting more and more people out from accessing the market, and forcing others to save longer for a deposit,’ it said.
‘Even for those who could in theory afford to buy, current prices may still be off-putting. Unfortunately, there is little reason to anticipate a material improvement in affordability next year either.’