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House price growth slows to six-year low

House price inflation slowed to 2.5 per cent during December, according to the Office for National Statistics.

This was the lowest annual rate of house price inflation since July 2013 and continued the slowdown seen in the housing market over the past two years.

The average UK house price was £231,000 in December 2018 – £6,000 higher than a year previously.

On a month-on-month basis, house prices only rose by 0.2 per cent between November and December.

Dilpreet Bhagrath, mortgage expert at Trussle, said: “Even with the slight increase in prices, it’s clear that Brexit nerves and uncertainty is still affecting the market. Not to mention the ongoing lack of supply, with more risk-adverse sellers staying put until the economic picture becomes clearer.

“That said, for new buyers, the current low interest rate climate coupled with the government’s commitment and extension of the help-to-buy scheme will offer further support for those hoping to get a foot on the ladder.

“For the slightly more cautious first-time buyers, opting for fixed rate mortgage deals might be favourable, giving complete clarity over how much your mortgage costs each month so that you can plan ahead.”

Steve Seal, director of sales and marketing at Bluestone Mortgages, added: “Slower house price growth is no doubt a reflection of potential buyers choosing to adopt a ‘wait and see’ approach before committing to the biggest purchase of their life – a home.

“To tackle this, lenders are offering near record low deals to reassure borrowers that there is still plenty of opportunity to lend.”

The lowest annual growth was in the North East, where prices fell by 1 per cent over the year to December 2018, followed by London where prices fell 0.6 per cent over the year.

House prices in London have now fallen from a peak of £488,527 in July 2017 to £473,822 in December.

Meanwhile house price growth was strongest in Northern Ireland, where prices increased by 5.5 per cent, and Wales, where house prices increased by 5.2 per cent.

The ONS said the increase in house prices in Wales was driven by strong growth in the south east of the nation, likely linked to the abolition of tolls on the Severn Bridge.

Despite the strong house price growth in Northern Ireland, it remains the cheapest area of the UK for property, with the average home costing £136,669 compared to £247,886 in England.

Source: FT Adviser

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House price inflation slows to 2.7% across UK cities

House price growth across UK cities has reduced steadily across 2018 and currently stands at +2.7% when comparing December 2018 with December 2017, Zoopla’s UK Cities House Price Index has found.

The slowdown has been driven by price falls in London (-0.2%) and Cambridge, which has seen prices drop 3.8% annually while the rate of growth has slowed across Southern cities.

Richard Donnell, research and insight director at Zoopla, said: “Weaker growth in London, Cambridge and Aberdeen has been a large drag on the headline rate of house price growth across the UK cities index over the last year.

“House prices in London have been falling for almost 12 months while the rate of growth has slowed across cities in southern England, a result of growing affordability pressures, higher transaction costs and increased uncertainty.

“The strongest performing cities are outside south eastern England where affordability remains attractive and employment levels are rising.

“We expect current trends in price growth to continue across the rest of this year, with prices rising in line with earnings for much of the UK but lower growth and some house prices falls in London and the South.

“London will continue to register price falls, concentrated in inner London where prices have grown the most over the last decade. Prices continue to increase slowly in the more affordable outer and commuter areas of London.”

Northern, Midlands, Scottish and Welsh cities all lead the way for annual growth with Edinburgh’s average price up 6.8% annually; Liverpool up 6.3% and Birmingham, Nottingham and Cardiff all seeing prices increase by 5.9%.

There’s a clear North-South divide when it comes to house price growth. The 13 cities in its ‘20 cities index’ posting the highest growth are all located in the North, Scotland, the Midlands or Wales with Bristol in the South West the exception.

Other than Aberdeen, where the housing market has suffered due to oil prices, the ‘bottom seven’ cities are all in the South or East of England.

Some 10 cities have posted double digit growth since the 2016 vote, with Birmingham (pictured) (+16%) and Manchester (+15%) leading the charge.

In a reversal of fortunes, leaders in the broad recovery phase (London, Oxford and Cambridge) are now amongst the very poorest market performers post-Brexit vote.

Southern cities that outperformed during the broad recovery phase are now experiencing significantly decelerated growth, as economic and political uncertainty is more acutely felt here.

Source: Mortgage Introducer

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House price growth at lowest level since 2012

Annual house price growth has hit its lowest level since 2012, figures from Your Move found.

At the same time, Rightmove’s January House Price Index revealed only a 0.4% increase in asking prices – the slowest monthly rise since January 2012.

Asking prices fell to £298,734 from £297,527 in December 2018.

The national average has been dragged down by new to the market sellers who realise they have less pricing power than usual given the current market backdrop, especially in the South, according to Rightmove.

The number of properties coming to market in the first two weeks in 2019 is broadly the same as a year ago, with owners in more northerly regions showing greatest propensity to move.

However, visits to Rightmove rose by five per cent in the first two weeks of 2019, compared to a year ago, with an average of over 4.5m visits each day.

Miles Shipside, Rightmove director and housing market analyst, said: “Agents report that activity is now picking up, though when you dig underneath the national averages, the first snapshot of 2019 shows a somewhat patchy and variable picture depending on where you are in the country.

“Given the current market backdrop and ongoing political turmoil, it’s not surprising that the more challenging conditions in London and its nearby regions mean that they appear to have had a slower start to the year.

“Traditionally this is the time of year when more movers look at a wider choice of fresh property supply and kick-start the market, and this year’s buyers have the added spur of the slowest rate of new year price increases for five years.”

House price growth falls

Separate research from Your Move showed annual price growth continued to slow standing at its lowest level since April 2012 at 0.6%.

Average house prices are up by £1,690 over the last 12 months, meaning the average property price in England and Wales at the end of the year stood at £306,647.

Overall the market continues to flatline, but regional and local variations are becoming increasingly marked.

Annual growth in the North West and East and West Midlands is outpacing inflation, while the South East, East and Greater London are all struggling to maintain growth at all.

While the market is still seeing nominal price growth, the number of transactions has fallen – down 2.4% in 2018 on the previous year.

The slowdown in house price growth has, however, made house prices more affordable in real terms over the last year, and the mortgage market remains highly favourable for buyers.

Oliver Blake, managing director of Your Move and Reeds Rains estate agents, said that due to current political and economic unrest it is understandable why buyers and sellers may be taking a ‘wait and see’ approach to the property market.

He added: “In turn, as demand waivers, it means that property may become more affordable to more people. This should help buyers, and first-time buyers in particular, when they are ready to act.”

Source: Your Money

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There’s only one way to fix the housing crisis: build more

From free marketeers on the right to proponents of central planning on the left, cries to fix Britain’s broken housing market have become deafening.

The solutions, of course, differ greatly depending on where along the political spectrum you stand.

Yesterday, for example, Shelter issued its latest call to action, proposing three million new social homes to be built over the next 20 years. The housing charity points to the high costs and levels of insecurity among renters, and makes a link between “insecure unaffordable private rentals” and the rise of homelessness across Britain.

Shelter has correctly identified two key problems: that home ownership is becoming increasingly unaffordable, and that the rental market is not set up for long-term, stable tenancies, as seen in other countries.

It is also correct that other government policies to fix the problem, such as the Help-to-Buy scheme, are not an effective use of taxpayer money and actually distort the market by tinkering on the demand-side.

Building more social houses, however, is only one small part of a solution that must go far further. After all, the UK is already in the top three European countries in terms of social housing stock.

It’s not the lack of building social houses that is the key problem, but the lack of building full stop. This is set to be the worst decade for UK house-building since the Second World War, continuing a downward trend that has lasted half a century.

The result is that, even with the recent slowdown in house price growth, one in three millennials will never own their own home.

Unfortunately, this is where politics comes in, with endless arguments over who should build what kind of homes where and with what funding. For too long, stringent planning restrictions have prevented building in places where people actually want to live.

This needs to change – and in some cases it finally is, with a cross-party plan to redesignate areas of the so-called green belt within 10 minutes’ walk of a station to build a million extra homes around London.

There are other things we could do, from exploring high-tech construction methods like modular homes to repurposing disused retail and warehouse space to building new commuter towns with cutting-edge transport links, as well as looking into reforming the rental sector.

However, without more building – and lots of it – the housing crisis is only going to get worse, and is set to throw a spanner in the works of any government, from any party, that hopes to improve business competitiveness, social mobility, and standards of living in the UK.

Source: City A.M.

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House-price growth slows to six-year low amid weak confidence

House price growth slowed sharply as 2018 drew to a close, with the UK recording its weakest annual growth in nearly six years.

Annual house price growth slowed from 1.9 per cent in November to 0.5 per cent in December, Nationwide Building Society has said.

But Scotland fared slightly better, with house prices in 2018’s fourth quarter 0.9 per cent higher annually, at £147,856 on average.

The 0.5 per cent increase in December was the weakest since February 2013. House prices were down by 0.7 per cent month-on-month in December.

Across the UK, the average house price in December was £212,281. London and some commuter belt areas surrounding the capital have seen house prices dip year-on-year.

In London, the average house price in the fourth quarter of 2018 was £466,988 – 0.8 per cent lower than the same period in 2017.

Northern Ireland was the strongest performer, with house prices in the fourth quarter of 2018 up by 5.8 per cent annually to reach £139,599 on average, followed by the East Midlands and Wales, where house prices lifted by 4 per cent annually.

Nationwide’s chief economist Robert Gardner said: “UK house price growth slowed noticeably as 2018 drew to a close, with prices just 0.5 per cent higher than December 2017.

“This marks a noticeable slowdown from previous months.” He said there have been indications a softening in the housing market was likely, including weakened consumer confidence.

Mr Gardner said: “The economic outlook is unusually uncertain. However, if the economy continues to grow at a modest pace, with the unemployment rate and borrowing costs remaining close to current levels, we would expect UK house prices to rise at a low single-digit pace in 2019.”

Source: Scotsman

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North records highest annual house price growth in the UK

THE north recorded the high annual house price increase in the UK at the end of 2018, according to new figures.

Northern Ireland was the strongest performer in the latest Nationwide Building Society index, with average house prices in the final quarter of the year up 5.8 per cent annually to £139,599.

The unparalleled growth in the north was in contrast to the overall picture in the UK, where the weakest annual growth was recorded in almost six years.

The 0.5 per cent increase to an average of £212,281 in December was the weakest since February 2013. That figure was also down 0.7 per cent month-on-month.

In London, the average house price in the fourth quarter of 2018 was £466,988 – 0.8 per cent lower than the same period in 2017.

The strong growth in Northern Ireland was followed by Wales and the east midlands, where prices lifted by 4 per cent annually to £156,891 and £184,283 respectively.

In Scotland prices grew by 0.9 per cent over the same period to an average of £147,856

Robert Gardner, Nationwide’s chief economist said UK house price growth slowed noticeably as 2018 drew to a close.

“It is likely that the recent slowdown is attributable to the impact of the uncertain economic outlook on buyer sentiment, given that it has occurred against a backdrop of solid employment growth, stronger wage growth and continued low borrowing costs,” he said.

“Near term prospects will be heavily dependent on how quickly this uncertainty lifts, but ultimately the outlook for the housing market and house prices will be determined by the performance of the wider economy – especially the labour market.”

“The economic outlook is unusually uncertain. However, if the economy continues to grow at a modest pace, with the unemployment rate and borrowing costs remaining close to current levels, we would expect UK house prices to rise at a low single-digit pace in 2019,” Mr Gardner added.

Howard Archer, chief economic adviser at EY ITEM Club believes the housing market ended 2018 “very much on the back foot”.

“Brexit and economic uncertainty may well have an increased dampening on housing market activity in the near term at least.”

Jeremy Leaf, a north London estate agent and a former residential chairman of the Royal Institution of Chartered Surveyors (Rics) said the figures are a wake-up call for the housing market.

“After steady progress, without much change one way or the other, prices have experienced a nasty bump.”

“Looking forward, this is always a fairly quiet time anyway for the market so the reasonable start we have had to business won’t be seen in the figures for at least the next month or so,” he added.

Source: Irish News

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UK house prices 2019: What experts say will happen after Brexit

Has there ever been a more difficult time to predict the future of UK house prices? Political uncertainty looms large over the UK’s property market, but experts have nonetheless given their expectations for the year to come.

Bank of England governor Mark Carney showed how dangerous the numbers game can be in November, when he had to clarify that he was not suggesting the property market would crashin the wake of a no-deal Brexit, despite warning that in a worst-case scenario house prices could fall by up to 35 per cent.

Subdued activity in parts of London, particularly at the higher end of the market, has dominated the headlines in recent months.

However, outside the M25 house prices have largely continued to grow modestly, with the fastest rises in the north west of the UK. According to the Nationwide House Price Index, in November UK house prices bucked expectations after growing by more than many economists had forecasted, edging up 0.3 per cent.

Industry voices such as the Royal Institution of Chartered Surveyors worry that uncertainty over Brexit and squeezes on household budgets are likely to dent demand in the year ahead, although many are predicting a rise in prices beyond 2019.

Here is what the experts predict will happen in 2019, whether you’re planning to buy or sell:

JLL

2019 UK house price growth prediction: 0.5 per cent

2019 London house price growth prediction: 1.5 per cent

Corporate property giant JLL said that it predicts a bright future for the UK housing market. The property consultant is projecting a return in confidence and a new phase of affordability if a Brexit deal is agreed.

Although it says that housing starts will remain subdued in 2019-20 at 175,000 – 180,000, they will gain traction from 2021 onwards. Providing a deal with the EU is reached, JLL predicts house prices across the UK are forecasted to grow by 11.4 per cent in the next five years.

Savills

2019 UK house price growth prediction: 1.5 per cent

2019 London house price growth prediction: -2 per cent

Savills says that it is affordability, rather than Brexit, which is the major factor for the UK housing market. The property giant is forecasting that UK house prices will rise 14.8 per cent from 2019-2023, although there will be significant regional variation.

While London is projected to see growth of 4.5 per cent over this period, it will dip by two per cent in 2019, while the north west is expected to see a 21.6 per cent rise over the period. London’s prime market will also see double digit growth at 12.4 per cent, according to Savills.

Rightmove

2019 UK house price growth predictions: 0 per cent

2019 London house price growth predictions: -1 per cent

The UK’s largest online real estate portal and property website is forecasting a flat 2019 for house prices, while they will continue to dip in London.

Rightmove’s prediction for parts of the more buoyant northern half of the UK are set to rise by two to four per cent, though this will be offset by new sellers adjusting their prices downwards in parts of the south.

Miles Shipside, Rightmove director and housing market analyst, says: “While buyer affordability is stretched in some parts of the UK due to house price rises having outstripped wage rises, the underlying fundamentals supporting the housing market are currently sound. Positive employment data and affordable mortgage interest rates at high loan-to-value ratios are key to keeping property prices broadly in line with current levels.

Cluttons

2019 London house price growth prediction: 10 per cent fall in next 18 months

Cluttons, the London-based firm of chartered surveyors and property consultants, predicts that the London residential property market will fall a further 10 per cent before prices begin to recover in a year to 18 months’ time.

Recent Cluttons data found that average house prices have fallen 6.8 per cent and 4.6 per cent in prime central London and core central London respectively over the past 12 months, with no areas registering any increases. Head of residential James Hyman said that the London market “still faces significant challenges in terms of affordability, buy-to-let investors and outdated infrastructure”.

The Royal Institution of Chartered Surveyors (Rics)

2019 UK house price growth prediction: 1 per cent

Rics estimates that prices will rise by one per cent in 2019, although surveyors believe that uncertainty about Brexit is likely to hit the UK housing market well into next year.

The group is expecting the number of homes being sold, as well as the prices that they are being sold for, to edge down over the next three months. Residential properties are taking an average of four months to sell, the longest period since records began in 2016.

“It is evident from the feedback to the latest Rics survey that the ongoing uncertainties surrounding how the Brexit process plays out is taking its toll on the housing market,” said Rics’ chief economist, Simon Rubinsohn.

“Indeed, I can’t recall a previous survey when a single issue has been highlighted by quite so many contributors.”

CBRE

2019 house price growth predictions in London: 0 per cent

In CBRE’s predictions for the coming years, London house prices are set to be flat in 2019, but picking up by 1.6 per cent in 2020 and by 3.5 per cent in 2021. Between 2019 and 2023, the real estate adviser is expecting growth of roughly 10.5 per cent in the capital’s house prices.

Source: City AM

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RICS warns that agents will have a tough time of it next year

The Royal Institution of Chartered Surveyors warns today that the UK housing market has a tough year ahead of it.

The RICS is forecasting that overall sales volumes will be down by around 5%, while house price growth is likely to stall – although lack of supply should prevent outright falls.

The RICS is also predicting that rental price growth will accelerate slightly next year, because of a declining availability of homes to let.

The organisation said that the housing market has lacked impetus this year, due to Brexit uncertainty, lack of homes on agents’ books, affordability issues, and the possibility of interest rate rises.

It says: “In the past two years sales activity has declined and annual completed transactions remain significantly below the 1.7m high in 2006.

“Given the obstacles in the current market it is anticipated that activity will weaken further.

“As sales activity continues to falter, house price growth will continue to fade in the first half of the year, and is expected to come to a standstill by mid-2019.”

Hew Edgar, head of policy at the RICS, said: “Looking at transaction levels, residential property taxation is in urgent need of review; and this goes for both SDLT and the current council tax system.

“Both affect buying behaviours and therefore market activity, with council tax being particularly outdated.

“If the Government wish to alleviate market concerns, that will persist Brexit or otherwise, then all possibly approaches and outcomes should be considered, including looking at tackling the rising number of long-term empty homes.

“These number 250,000 across the UK – a figure that borders on the Government’s new homes target.”

Belvoir agreed with the RICS forecast for next year, saying that in a market with falling property transactions more people will be likely to rent.

Chris Cooper, of London firm Berkshire Hathaway HomeServices Kay, said: “With uncertainty still swamping parts of the sales market, 2019 is set to be a big year for lettings.

“We’ve seen a great level of demand right the way through the year, from both domestic and international tenants, even those within the EU, and I can’t see that this will slow down in the foreseeable future.”

Residential property management firm FirstPort said that next year will be when Build to Rent really has to deliver at speed and scale.

It said that new investors in the UK Build to Rent market would emerge from Canada, the USA, France and the Netherlands.

Alexandra Morris, managing director of lettings platform MakeUrMove, said she expects the housing market to slow down dramatically next year.

Forecasting that home movers would slam the brakes on plans to buy or sell, she said: “Because it will be a time of uncertainty, it’s likely that people will be more cautious about making commitments such as buying property.

“Buying conditions may also become more difficult. Instead, it’s likely larger landlords will grow in 2019 as they acquire these properties because they will be able to spread the risk.

“With uncertainty about the rights of EU workers if the UK leaves without a deal, areas of the country where landlords provide accommodation to large EU migrant communities could also be affected next year.

“If EU workers return to the continent, there will be a host of empty houses and flats. Landlords will be hit financially if they can’t find new tenants to let the properties.

“This will have a knock-on effect on rental prices. In areas where there is then an oversupply of rental properties, landlords will be forced to reduce rents or sell.”

She also forecast that the tenants’ fee ban will not come in until next autumn.

Source: Property Industry Eye

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More good news on house prices – there’s no sign of them picking up soon

Let’s turn away from the fun of Brexit for the time being.

Let’s look at something far more important.

Let’s have an update on how the UK housing market is doing.

You could make our housing system worse, but you’d have to try hard

British house prices are far from being the world’s most important asset class. But the statistics tell me, that in the eyes of our readers and most of the British public, a spike in the ten-year US Treasury yield, a plunge in the price of oil, or a slide in the Chinese yuan, are as nothing compared to a blip in the fortunes of the most coveted asset in the UK.

And frankly, no wonder. Most of us have ploughed most of our present wealth into said asset, and many of us continue to plough massive chunks of our monthly income into it as well.

It’s hard for it not to loom large in our minds when, on top of all the emotionality of a home, you have a huge, floating-rate (or temporarily fixed-rate) debt attached to it. In many ways, those of us with mortgages are just sitting on epic spread bets.

The prize at the end of the road, is that you get to keep your house. Yes, it might have risen in value, but that’s beside the point. If you live in a house, you’ll need to buy another one. So the cost of that will have risen too.

And the government will then take a hefty chunk in the form of stamp duty – or to use a more accurate term, the “moving tax”. Once you’ve paid this moving tax, downsizing may no longer look like a viable method of “unlocking the value” in your home.

On the other hand, the risk you take is that it all goes pear-shaped and you either lose the roof over your head, or you end up desperate to move but you can’t, because you’re in negative equity (your mortgage is worth more than the equity in the house).

Wow. It’s pretty stressful when you look at it like that. You’d think we’ve have come up with a better system by now.

Particularly as it also means that the health of the banks – who provide our all-important financial plumbing – is  leveraged to the health of the labour market, and therefore to economic growth. Which in turn is dependent on credit growth, and therefore on the health of the banks.

It’s one giant positive feedback loop. That sounds like a good thing, but it’s not. A negative feedback loop is one where you do something stupid, you get a slap on the wrist (negative feedback), and you stop doing it. That system tends towards equilibrium – stability.

A positive feedback loop is where you do something stupid and you get a pat on the back (positive feedback). So you keep doing it. Until one day you do something so catastrophically stupid that rather than a pat on the back or a slap on the wrist, you get a punch in the mouth. That system tends towards wild swings – or “boom and bust”, as it’s more commonly known.

I’m sure you could design a worse system if you tried (and make no mistake, this stuff is hard – if it was easy, it wouldn’t be a problem in the first place, and people who think it’s easy and wade in with their brilliant ideas usually make things worse).

The trouble is, any significant change will create losers, and a lot of them at that. So change is likely to be slow when it happens, and it will involve incremental shifts that target the politically vulnerable – such as buy-to-let landlords, for example.

The slowdown in UK house prices is not all down to Brexit

Anyway, rant over for now. What’s actually happening to prices?

According to the latest figures from Nationwide, house prices rose at an annual rate of 1.9% in November. That’s a fall in “real” (inflation-adjusted) terms, regardless of whether you gauge that by CPI, RPI, RPIX or wage inflation.

And the Royal Institution of Chartered Surveyors (Rics) isn’t feeling too cheerful either. More of their members are reporting falling prices than at any point since September 2012.

They are pinning the blame on Brexit. At this point, there’s probably something to that. To be clear, I don’t think that Brexit will have the sort of effect on house prices that should persuade the average individual to delay or accelerate a long-term decision like buying a house.

That’s not because of my political views on Brexit; it’s more because this is going to be a lengthy process one way or another (even a “hard Brexit” would involve a lot of back and forth after the initial deadline). So trying to time your sale or purchase (unless your job is likely to be directly affected by Brexit) is somewhat futile.

But if people settle on the idea of “let’s not put the house on the market until after March”, then that will obviously have an effect on the market. You can’t buy if there isn’t much out there for sale.

So there’s a bit of Brexit in there. And it’s a wonderful excuse for property commentators to settle on.

But this sense of pessimism is not new. And it’s not limited to the UK. Various overpriced parts of Australia and Canada are both seeing what I suspect is the start of a prolonged house price crash. Neither of them are attempting to leave the European Union.

The real problems with global house prices – politics and interest rates

The real issue is that both politicians and central bankers have woken up to two things. One is that “the people” are fed up of feeling unable to buy property anywhere near where they work. Two is that the 2008 financial crisis was caused by banking exposure to residential property.

On the first point, it means that politicians make various rules that make it harder for certain buyers – second home owners, landlords, and rich foreigners. On the second point, central banks might not all be raising interest rates, but they are making it harder for banks to lend against residential property. Mortgage lending is getting stricter.

On top of that, you have the fact that global capital no longer likes the idea of tying itself up in assets that are illiquid and physically impossible to shift from one country to another. And on top of that, you’ve got the fact that interest rates – the key driver of the price of a yield-focused asset like housing – are slowly but steadily grinding higher.

Will Britain avoid an actual house price crash? My gut still says “yes”, at least for now. One big risk is that nothing bad happens with Brexit (we get some variation of Theresa May’s deal, say, and we set the course for several more years of hardcore Remainer–Brexiteer sniping, but no real change).

That’s when the Bank of England might have to start paying attention to rising wages and think about hiking interest rates. Yet with most people on fixed-rate mortgages, it would probably take a while even for this shift to make itself felt.

So the “golden scenario” – whereby prices fall a bit but wages rise a good bit faster, and so you get a correction in “real” terms rather than nominal ones – still looks very possible.

Maybe then we can look at a better way to do things. But I wouldn’t bet on it.

Source: Money Week

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House Price Growth at 6-Year Low

Quarterly house price growth in the UK has slowed down to its lowest rate in 6 years.

According to the Halifax house price index, the average house in the UK costs £224,578, a 0.3% rise compared to this time last year. This is the lowest annual growth rate since December 2012, when the UK was in a recession.

In fact, house prices have fallen in the last month, with the average price of a house in November down 1.4% from the previous month. Halifax’s data has shown that average house prices have fallen in three out of the past four months. Overall, the average value of a UK home has dropped 1.1% over the last quarter.

Analysts have claimed that economic uncertainty over Brexit has limited the growth of the UK housing market. On Friday, property developers Berkeley Group warned that the short-term outlook is “clearly uncertain due to the ongoing Brexit process and a number of headwinds in the operating environment in London and the south-east”, and that such uncertainty has had a “consequential adverse impact on investment levels and transaction volumes”.

Last month the Bank of England claimed that in a worst-case no-deal Brexit scenario average house prices could fall by 30% once the UK leaves the EU. At the same time, if the government is successful in securing a smooth Brexit transition deal, higher borrowing costs could result in the Bank of England raising their interest rates. This could cause affordability problems for a large proportion of the population, resulting in further slowdowns or even drops in average house prices.

Price growth in the more expensive areas of the country in particular has been relatively strong in the mid-long term since the crash in 08. Average prices in London and the South East have risen by 40% over the past five years alone. Economists have suggested that a lack of new housing and the help-to-buy subsidy have contributed to the rapid increases. Higher demand from foreign investors has also helped drive up prices, especially in London.

Many economists believe that the growth trend over the last few years is not sustainable, as house prices continue to rise above real wage growth. According to the Office of National Statistics, the average full-time worker had to pay 9.7 times their yearly salary in order to buy a newly built home in 2017. This figure has more than doubled in the last twenty years, as in 1997 workers were expected to pay just 4.6 times their salary.

Also, the amount of high loan-to-income ratio mortgages offered by banks has been limited by the Bank of England, so first-time buyers need to pay even more on their deposits if they want to buy a house. All these factors have lead to decreased affordability throughout the housing market, suggesting that the housing price growth over the last few years cannot be sustainable.

Hansen Lu, a property economist at Capital Economics, said: “The fundamentals suggest that an acceleration in house price growth is unlikely. House prices are still very high relative to incomes and this is unlikely to change soon.”

Source: Money Expert