It is fair to say the contrary evidence and forces at play in the UK’s housing market (let alone any expectations of international economic fillips or headwinds) are making forecasting the short-term future a tricky business.
At the end of March, the Office for National Statistics reported that British consumers had spent more than they earned for a record ninth consecutive quarter at the end of last year and in doing so offset falling business investment to underpin a measly rate of quarterly economic growth.
Consumers have underpinned Britain’s economic expansion since the Brexit referendum as businesses have slowed or ceased investing. But this support has come at a cost as spending has grown despite a fall in the pound that has reduced real incomes, meaning consumers have had to either borrow more or dip into their savings.
Could this behaviour explain the optimism reported in March by the Halifax that reported a 5.9% increase in February in house prices that lifted the average property price to £236,800?
This news predictably divided pundits (some arguing it was a correction to January’s poor figures) but another report by HMRC showed that the number of residential transactions totalled 101,170 in January 2019 – a monthly rise of 0.8% and an increase of 1.3% compared to January 2018.
All this would suggest that the housing market remains quite stable, and many maintain that the market should expect circa 1.2 million home sales for this year, as there have been in every year since 2013.
But completions data is clearly based on sales agreed as much as three months ago. Certainly at the front end of the value chain, few estate agencies are sounding overly positive about sales.
News of closures is not uncommon and Winkworth’s trading statement released in March reflected a common sentiment that while its rental side blossomed, sales suffered thanks to the familiar cocktail of Brexit, uncertainty and affordability issues.
It’s clear that, notwithstanding our current turmoil, certain long-term factors continue to impact the market. We are missing our new build targets and we have higher numbers of people who want to buy, living in private rented accommodation.
The chances of owning your own home, if you were born since the 1980s, have melted away. Supply, affordability and a lack of transactions continue to thwart society. The housing market needs more policy thought, more supply and more delivery if it is to deliver a meaningful economic and political purpose.
In the short-term, everyone appears to be hoping for a post Brexit bounce that will temporarily unlock the market and allow sellers to come forward and deliver buying demand and increased transactions.
But whatever the next few weeks bring for our nation, we should not mistake any short-term improvement in activity for a ‘fix’ to our market. Our energy and our efforts should be refocused on dealing with our housing market’s longer-term problems.
By Joanne Atkin
Source: Mortgage Finance Gazette