The housing market has been sending out some mixed messages recently. On the one hand there’s talk of consumers being reluctant to make big decisions amid wider economic uncertainty and a squeeze on living costs, but on the other hand, house prices have continued to climb in many areas, with reports of a lack of properties to choose from in popular locations.
So what will happen to house prices in 2018? In general, predictions have ranged from prices being flat across the UK to edging up by a few percentage points by this time next year. Economists believe the squeeze on incomes from inflation will limit what buyers are willing to pay.
Robert Gardner, chief economist at Nationwide Building Society, says: “How the housing market performs in 2018 will be determined in large part by developments in the wider economy. Brexit developments will remain important, but hard to foresee.”
This year has seen big differences between areas of the UK in how the housing market has performed. The Royal Institution of Chartered Surveyors has said pricing in Scotland, Wales, Northern Ireland and north-west England has been resilient compared with some other places.
While London has seen a cool-down, some other major cities, where housing affordability is less stretched, have been putting in a relatively strong performance.
Richard Donnell, insight director at property analysts Hometrack, says: “The likes of Manchester, Birmingham and Glasgow have seen market activity increase and this has delivered above-average price growth of 6 per cent to 8 per cent for the last 12 months.”
When it comes to sealing a deal, more house sales are going through at less than the original price sellers had wanted, according to estate agents. For some buyers, they may find there’s more room for negotiation, depending on what the local housing market is like at the time.
But the supply of properties on the market is still tight in many places, so sellers in these areas may feel more confident in holding firm on price.
Across the UK, 85 per cent of properties sold for less than the asking price in November, according to the National Association of Estate Agents – the highest proportion since its records started in 2013. One in eight (12 per cent) properties sold for the asking price and 3 per cent sold above the asking price.
As regards mortgages, despite the Bank of England hiking the base rate from 0.25 per cent to 0.5 per cent in November, the rates on offer are still “extremely low”, says David Hollingworth from broker London & Country Mortgages.
He says some mortgage borrowers will be receiving their annual statements in January, which can help them to take stock of whether they should make switching mortgage their New Year’s resolution or whether they are already on a good deal.
In some good news for first-time buyers, Hometrack predicts this sector will make up the largest group of buyers in 2018.
Donnell says: “We expect first-time buyers to be the largest group of buyers in 2018 accounting for over one in every three sales and overtaking existing home owners as new purchases by investors fall in the wake of tax changes.”