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UK property prices are in the doldrums

House prices barely rose in 2019. Good news, says Nicole Garcia Merida.

It’s been a sleepy year for the property market. The average house cost £211,966 in January and £215,734 in November, according to figures from Halifax. That’s a gain of just 1.8%. London, which during upswings often outperforms the rest of the country, is now underperforming it. By October the average cost of a house in the capital had slipped by 1.6% year-on-year to £472,232, says the Land Registry.

The market’s lacklustre performance in 2019 continues a trend observed in the past few years; prices have made small percentage gains or trod water. This is hardly scintillating material for dinner-party dissections of the property market, but as we like to point out regularly, it is good news in the long term.

The price rises of recent years, fuelled by loose credit and government tinkering such as Help to Buy, which artificially fuelled demand, have propelled the market to unaffordable levels. The house price-to-earnings ratio is steadily declining from record peaks of over seven – but the credit bubble pushed it far beyond the usual levels of below four seen in the 1980s and 1990s.

Flat prices in conjunction with regular increases in wages are a painless and steady way for the market to fall to affordable levels. It bodes well, then, that annual wage growth has strengthened in the past year and reached an 11-year high of 3.9% in June. The bigger picture is also encouraging for those keen for the market to cool. House prices in Great Britain rose by 34% on average in the past ten years.

But once the figures are adjusted for inflation, they have fallen 0.3%, according to a Savills report using Nationwide data. The subdued 2010s followed a 67.1% real-terms increase in the 2000s and a 13.9% slide in the 1990s.

The outlook for 2020

There has been widespread talk of a “Boris bounce” for the property market as well as for shares. There is now certainty over our departure from the EU and a clear majority in Parliament reduces political uncertainty. However, while Brexit-related uncertainty hampered the market in the past three years, its removal doesn’t necessarily mean that the market will rocket. As Emma Powell and Alex Newman point out in the Investors Chronicle, the housing market began to slow in 2015 before the referendum.

The main problem remains affordability, notes Callum Jones in The Times. The house price-to-earnings ratio was still 6.8 in the third quarter of 2019; along with mortgage loan-to-income restrictions, this makes it difficult for buyers to muster deposits and bolster overall prices.

Throw in dwindling support from Help to Buy and the upshot, reckons Capital Economics, is that house-price growth will “only pick up a little” next year.

Where to look on the Crossrail route

In recent years there have been plenty of breathless articles in the financial press highlighting the scope for house-price rises in certain areas owing to the arrival of Crossrail, or the Elizabeth Line. But it is always hard to gauge how much a local price rise owes to a specific project and how much to a wider market upswing.

In any case, a Savills study suggests that house-price growth has faltered close to two-thirds of the Crossrail stations, as Anna White points out in the Evening Standard. How much this has to do with the delay to Crossrail and how much with the wider London slowdown is a moot point, but those in the market for a new home with good transport links should consider some of these areas. In each case, general regeneration may give prices more pep, reckons White.

One to look at is Southall, where the Crossrail station and new houses are reviving a “tired high street”. The typical house costs £310,000. Slough, once Crossrail opens, will be almost half an hour closer to Canary Wharf, while multimillion pound investment will transform the town centre, says Renata Holland in the Evening Standard. The average house will set you back £243,000. Acton, meanwhile, was once regarded as “Ealing and Chiswick’s poor relation”, says Andrea Dean in Metro, but it is now on an “equal footing”. A house costs £443,000.

Investing in empty property

Buying an empty property may seem like a straightforward way of buying a house on the cheap. There are certainly plenty to choose from: in England alone, there are over 200,000 that have been empty for at least six months, the legal definition of a long-term vacancy. Owners struggle to sell or derive an income from them so they may be keen to offload them for a reasonable price. But be sure the sums add up.

Finding a vacant property can be as easy as going for a drive around the area you’re interested in and spotting one. Otherwise, it might be worth contacting estate agents keen to make a commission, or local councils as they will be keen to get the property back into use, says Chris Menon in Moneywise. Monitor auctions around the area, too. If empty properties don’t sell you can contact the real-estate agent to discuss a price. Once you find the property, a search on the HM Land Registry website gives you the name of the owner, property limits and the risk of flooding.

Once you’ve found an empty dwelling, the key issue to consider is how much work it needs and how much it will cost. Could the sum be so high that it negates the saving on the empty house compared with a previously inhabited house needing no work? Once you begin enquiring about the price, get a structural surveyor in to produce a full report.

Factor in potential financial assistance too. There are initiatives offered by several councils that are designed to enable landlords and homeowners to apply for and receive up to £25,000 to refurbish an empty house to then rent out or sell, says Angelique Ruzicka in This is Money. The loans schemes began as a solution to housing shortages and unoccupied properties that have posed a problem for those living close by. Council loans are repayable after three years of renting out the property or when the property is sold.

Do your research and ensure you qualify for an empty home scheme, but otherwise mortgages are an option, says Menon. However, “many lenders may only lend up to 80% to 95% of the current value of the property and may withhold some funds as a ‘retention’ until works are complete”. If the property is entirely uninhabitable, you will need a broker to find you a specialist provider.

By Nicole Garcia Merida

Source: Money Week

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House prices set for steady growth in 2020 experts believe

THE housing market should start 2020 with a new mood of confidence – but continued political uncertainties will keep a lid on property prices, economists predict.

Several predictions for house price growth across 2020 are clustered around the two per cent mark.

Experts said the Conservatives’ recent general election win could help to bring more certainty to the market and unleash some pent-up buyer demand.

An abundance of low-rate and low-deposit mortgage deals should also support activity.

Some estate agents are even sensing there may be a “Boris bounce” for the housing market, which could in the coming months have an effect on house prices.

However, Brexit concerns could also pick up as 2020 progresses, making people behave more cautiously, and affordability constraints will also cap price growth in some parts of the UK.

Howard Archer, chief economic adviser at EY Item Club, said: “There will still be appreciable uncertainties, including on the Brexit front – so that the upside for house prices in 2020 is likely to be limited.”

Rightmove also predicts that the price of property coming to market will increase by 2% in 2020.

It said there is now an opportunity to release some pent-up buyer demand that had been building before the general election.

House sellers’ pricing power will be boosted by a lack of other options for potential buyers, Rightmove suggests.

The Royal Institution of Chartered Surveyors (Rics) has also pencilled in house growth of two per cent for 2020 – but it believes rents will increase at a faster rate of 2.5 per cent as the rental sector struggles with a lack of housing supply.

Russell Galley, managing director, Halifax, said housing market prospects for 2020 look “a bit brighter” than in 2019.

He continued: “However the shortage of homes for sale and low levels of house-building will continue to support high prices, while the challenges faced by prospective buyers in raising the necessary deposits may continue to constrain demand.

Separate consumer research from Lloyds Bank found 43 per cent of people think the biggest challenge for first-time buyers in 2020 will be raising a deposit, while 27 per cent think it will be high property prices.

A quarter think the biggest challenge for existing home owners looking to move will also be expensive property prices, while 23 per cent cited high moving costs.

By Martyn Smith

Source: Hereford Times

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28% of estate agents predict house prices to fall next year

More than a quarter (28%) of estate agents expect house prices to fall next year, down from 43% last year when agents were asked the same question, NAEA Propertymark has found.

Over half (56%) of agents expect house prices to stay the same.

A quarter of estate agents think the number of sales made to first-time buyers will increase whilst over half (58%) expect it to stay the same.

Mark Hayward, chief executive at NAEA Propertymark, said: “The changing political landscape throughout 2019 has undoubtedly caused uncertainty in the housing market, which in turn has affected sentiment and decision-making.

“Once the current political impasse is resolved and it’s clear how and when we’ll be leaving the EU, we hope there will be a degree of certainty which may trigger a flurry of activity.

“Regardless of the colour of the new government, housing must be a priority.

“A clear strategy is needed to tackle key issues such as stamp duty costs.

“Additionally, we’d like to see the government commit to bringing regulation into the sector as soon as they can in the New Year and to consider the introduction of digital logbooks to allow for a more interactive, streamlined and transparent process for home buyers and sellers.

“The housing market needs reassurance from the government, which will in turn inject some confidence into the market for both buyers and sellers.

“Despite the difficult year, the UK property market remains a strong sector overall, and has demonstrated a huge amount of resilience in the face of political turmoil.

“We hope for a more certain outlook and some stability in 2020, which is hopefully provided sooner rather than later.”

A third (32%) expect demand to drop and a further 28% think supply will increase.

By Michael Lloyd

Source: Mortgage Introducer

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Savills predicts drop in first-time buyers and boom in house prices for the north

House prices in the north-west of England will grow six times faster than in London over the next five years, Savills claims.

The agent has released its latest five-year price forecast for the housing market, with quite a few caveats.

The figures are based on an assumption that the General Election does not result in a significant shift in policy environment, that the UK ultimately achieves an orderly exit from the EU over the course of 2020, and avoids recession.

It also assumes that the bank base rate increases gradually to 2% by the end of 2024, constraining mortgage affordability and therefore house price growth.

With all that in mind, Savills predicts that first-time buyer numbers will slip back when Help to Buy is withdrawn. A new scheme is being launched in April 2021 with regional price caps that will run until April 2023.

Despite this, Savills forecasts that transactions will remain at around 1.2m, with cash buyers representing around a third of the market.

Overall, the agent expects UK house prices to rise by an average of 15.3% over the next five years to average £266,000 in 2024.

It is predicting a 0.5% increase this year, 1% in 2020, 4.5% in 2021 and 3% in 2022 , 2023 and 2024.

The north-west is forecast to see the strongest price growth at 24% between 2020 and 2024, attributed to “the strength and diversity of the regional economy and the capacity for higher loan to income borrowing”.

This will be followed by 21.6% growth in Yorkshire, 18% in Wales and 20% in Scotland, Savills said.

In contrast, average house prices are expected to increase by just 11% across the south and east of England and 4% across Greater London.

Savills said this was because these regions have already previously outperformed the rest of the UK.

Lucian Cook, head of residential research for Savills, said: “We anticipate a continuation of trends seen historically, where London and the south-east underperform markets in the midlands and north.

“This stage of the cycle appears to have begun in 2016, coinciding with the referendum, when London hit up against the limits of affordability.

“Markets further from the capital, such as Leeds, Liverpool and Sheffield, were much slower to recover post financial crisis and have much greater capacity for house price growth relative to incomes, even as interest rates rise.”

The agent also predicts that prime central London will, however, rebound and rise 3% next year, the first annual price growth since 2014, and increase 20.5% over the next five years.

Cook added: “PCL has become increasingly dislocated from the Greater London mainstream over the past five years; we expect that to go into reverse.

“Historically, a recovery in the prime markets has been sparked in prime central London, when the city’s most expensive properties start to look good value on a world stage.

“Values have been bottoming out over the past year, resulting in a build-up of new buyer registrations over recent months. Both signal that the market is set for a bounce, but this is being held up by uncertainty.”

5-year mainstream house price forecasts2019 av house price  £2019 est20202021202220232024Total5 year growth  2024 av house price £
UK231,0000.5%1.0%4.5%3.0%3.0%3.0%15.3%266,000
North West169,0004.0%2.5%6.5%4.5%4.5%4.0%24.0%210,000
Yorkshire & The Humber165,0001.5%2.0%6.0%4.0%4.0%4.0%21.6%200,000
Scotland151,0001.5%2.0%6.0%3.5%3.5%3.5%19.9%180,000
North East131,0001.5%1.5%5.0%4.0%4.0%4.0%19.9%157,000
West Midlands205,0003.0%3.0%5.0%3.0%3.0%3.0%18.2%242,000
East Midlands194,0001.0%3.0%5.0%3.0%3.0%3.0%18.2%229,000
Wales165,0001.5%2.0%6.0%3.0%3.0%3.0%18.1%195,000
South West256,000-0.5%0.5%4.0%3.0%2.5%2.5%13.1%289,000
South East321,0000.0%0.0%3.0%2.5%2.5%2.5%10.9%357,000
East291,0000.0%0.0%3.0%2.5%2.5%2.5%10.9%323,000
London462,000-2.5%-2.0%1.5%1.0%1.0%2.5%4.0%480,000

By MARC SHOFFMAN

Source: Property Industry Eye

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Average price paid for a house rose to the highest level in over a decade during third quarter

THE north hit the highest average price paid for properties on the open market for more than a decade, new research from Ulster University has shown.

The average price of home bought here rose to £171,763 between July and September .

House prices were up by five per cent in the third quarter of 2019 compared with the same period last year and 5.7 per cent up on the second quarter of 2019.

The University’s quarterly house price index, produced with the Progressive Building Society and the Northern Ireland Housing Executive (NIHE), recorded 2,339 transactions in the three months to the end of September.

The number of properties sold for under £100,000 fell by six per cent during the third quarter, accounting for 18 per cent of all deals done. The number of homes sold at below £150,000 was also down slightly to 55 per cent.

While the overall number of transactions were done on the last quarter, the number of higher value deals were up.

But the research found that Brexit and the associated economic uncertainty continued to curtail purchaser confidence and transaction levels.

Some estate agents did report an increase in house buying the first-time-buyer sector of the market over the course of the third quarter.

Head of research of the NIHE, Kathy Greene said: “These figures reflect the highest average price of properties sold on the open market in Northern Ireland for more than a decade, with a strong level of transactions reflecting ongoing demand, especially for affordable dwellings.

“There is reason to expect that the market will remain relatively healthy in the immediate future, while 2020 may bring a greater degree of clarity about some of the factors influencing the longer-term outlook.”

Lead researcher, Dr Martin Hinch from Ulster University said the third quarter reflected an element of “buoyancy” in the north’s housing market, following a prolonged period of relatively passive house price performance.

“This growth suggests robust market sustainability and displays a level of resilience through what has been an unprecedented and continued period of uncertainty,” he said.

“The ongoing Brexit situation together with the outcome of the upcoming general election will undoubtedly exert a significant short term influence upon the political and economic direction of the UK and Northern Ireland over the coming months.”

Progressive Building Society’s finance director Michael Boyd said the north remains one of the most affordable housing markets in the UK. Nevertheless, he said the rise in prices represented a welcome stimulus to the local market.

“However, there is still a reticence amongst some buyers and a requirement of a positive Brexit outcome will be crucial to supporting economic prosperity and the continuation of strong levels of transactions in the housing market.”

By Ryan McAleer

Source: Irish News

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Halifax says annual house price inflation slows to lowest growth so far this year

Average house prices were £232,249 in October, Halifax has reported.

The lender said this brought annual inflation to 0.9%.

Halifax managing director Russell Galley said: “Average house prices continued to slow in October, with a modest rise of 0.9% over the past year. While this is the lowest growth seen in 2019, it again extends the largely flat trend which has taken hold over recent months.

“A number of underlying factors such as mortgage affordability and wage growth continue to support prices, however there is evidence of consumers erring on the side of caution.

“We remain unchanged from our view that activity levels and price growth will remain subdued while the UK navigates economic uncertainty.”

The Halifax, which has recently changed how it calculates prices after criticism that its indices were out of sync with others, is still at odds with Nationwide, which also bases its numbers on mortgage approvals.

Nationwide puts the average house price in October at £215,368, saying that annual house price inflation was 0.4%.

By ROSALIND RENSHAW

Source: Property Industry Eye

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Brexit turmoil drags UK property price growth to lowest this year

UK property price growth has slowed to its lowest this year, with experts blaming Brexit turmoil for killing off the typical autumn bounce.

New figures from Halifax show 0.9% growth in average prices in October compared to a year earlier, the weakest year-on-year growth of any month in 2019 so far.

Russell Galley, managing director of Halifax, said sales and price growth will remain “subdued’ for as long as political and economic uncertainty continues.

News of the sluggish growth compared to trends over the past few decades came as Britain teetered on the brink of crashing out of the EU without a deal on 31 October.

Many businesses and analysts have warned a no-deal Brexit would be catastrophic for UK firms, jobs, consumers, and homeowners, rupturing decades of increased trade ties overnight with the EU, Britain’s biggest trading partner.

The Brexit deadline was pushed back after parliament forced prime minister Boris Johnson to delay Brexit and an election was called for 12 December.

“Perhaps a tad predictable that as we receive yet another Brexit-based encore from Westminster, the UK housing market also delivers the lowest rate of house price growth so far this year,” said Marc von Grundherr, director of London letting and sales agent Benham and Reeves.

Jeremy Leaf, a north London estate agent and a former RICS residential chairman, said: “Although the market remains fairly subdued, which may actually be a good thing in view of wider political and other concerns, we are finding it continues to be supported by fewer but more serious buyers.”

Adrian Anderson, director of mortgage broker Anderson Harris, said it was “not all doom and gloom” as mortgage rates are cheap.

“Lenders have to be more competitive than ever to attract business, resulting in a price war with mortgage rates falling significantly this year, benefiting borrowers,” he said.

The Halifax data showed a 0.1% month-on-month drop in prices in October, with the average price in the UK now just over £232,000.

By Tom Belger

Source: Yahoo Finance UK

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Scottish housing market has fastest sell time, research says

The time needed to sell homes in Glasgow and Edinburgh is half the average for UK cities, according to a survey.

Zoopla’s UK Cities House Price index for September reveals housing market conditions are strongest north of the border despite Aberdeen being the worst performer.

Glasgow and Edinburgh properties sell within six weeks on average, compared to 12 weeks across the whole of the UK.

Aberdeen was the worst performer, with homes taking more than 15 weeks to sell and sellers discounting their homes by 9.4%.

Richard Donnell, research and insight director at Zoopla, said: “There is a continued polarisation in housing market conditions across the country set by underlying market fundamentals, albeit Brexit uncertainty has been a compounding factor for lower market activity in some areas.

“A general election seems to be a growing possibility ahead of any Brexit resolution; however, once the political outlook becomes clearer, we would expect a modest bounce-back in demand for a six–12-month period.

“Market conditions are set to remain weak in southern cities until pricing levels adjust to what buyers are willing, or can afford, to pay.

“London is three years into a re-pricing process, and we expect sales volumes to slowly improve over 2020, while house price growth remains subdued.

“There are large parts of the country where housing affordability remains attractive, fuelled by continued economic growth that supports demand for homes, resulting in reasonable sales periods and only modest gaps between sales and asking prices.”

Glasgow and Edinburgh are also the only UK cities not to register a discount from asking to selling price.

Homes in the two locations instead command an average premium of 6-7% above the asking price.

In contrast, vendors across the UK now accept offers that are on average of 3.8% or £9,800 lower than the initial asking price.

Source: Herald Scotland

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House prices in the UK are still gently falling in real terms

Nationwide has just released its latest house price figures. In October, house prices were 0.4% higher than they were a year ago.

Your average UK home will now set you back £215,368 exactly.

Prices are rising more slowly than wages or wider inflation. That means they’re falling in “real” terms.

That’s great news…

Slowly falling house prices are a good thing

This morning’s figures from Nationwide show that UK house prices are still pretty much flat, and falling after inflation.

The economy is OK. Interest rates are low. Employment is high. Those things are likely to prevent an all-out crash.

On the other hand, rates probably can’t go much lower, while the impact of the effective removal of landlords from the housing market is still rippling through the market.

And while the resolution of Brexit might boost sentiment or activity at one level, it is also likely to lead to slightly higher interest rates, which I suspect would help to prevent a massive rebound in prices.

This is all good. As the Nationwide chart below shows, this means that affordability is gently improving.

I hope this continues. You’ve heard me say that dozens of times by now, but I like to keep reiterating it, for a couple of reasons.

One reason is that, here in the UK, we are rather attached to the idea of ever-rising house prices. I think it would be helpful for us to shed this attachment and instead recognise that hoping for a house to provide both shelter and a retirement income is a recipe for a high-stress existence.

This is unfortunately, as yet, a minority view. My colleague Merryn keeps a track via Twitter of the “how celebrities invest their money”-type interviews in the Sunday papers.

She’s always very excited to spot the occasional sensible celeb who not only has a pension, but also understands that said pension holds equities. However, mostly celebs say something along the lines of “I own property. The stockmarket’s just a casino. You can’t go wrong with bricks’n’mortar.”

There’s this weird notion that investing in stocks is faintly immoral gambling, whereas taking a punt with borrowed money on the housing market (competing with people who just want a roof over their heads in the process) is honest in some way.

Anyway, once people stop making fast money from property, that will hopefully start to change.

House prices are not about physical supply and demand

The second reason stems from the other end of the spectrum. I’ve noticed that the tenor of columnists getting annoyed about the “housing crisis” is becoming increasingly hysterical, probably because we’re coming up for an election (at some point) and housing is a political hot button.

The answer for these writers is always to “build more houses”, because it’s all about supply and demand. The problem is that it’s not that simple.

It’s interesting that we’ve become obsessed with the idea of building more homes at a time when – in many parts of the UK outside London – double-digit house price growth hasn’t been seen for over a decade.

You can certainly argue that the planning system is flawed (it is) and you can certainly argue that there are not enough houses in certain areas and too many in others, and that the quality overall is poor.

And you can certainly argue that there’s really no need for British homes to be the smallest in Europe. Yes we have a relatively big population but we’re not jammed in that tightly.

But a blanket policy of just “building more” won’t help. House prices are high because the cost of borrowing is low.

Put very simply, here’s how it works. At interest rates of 10%, a £900 monthly payment will pay for a 25-year repayment mortgage of £100,000. At interest rates of 2%, £900 a month will buy you a 25-year repayment mortgage of just over £210,000.

That’s why house prices go up when interest rates go down (assuming credit conditions slacken at roughly the same pace). Because the amount you can borrow to pay for the same house goes up.

It’s that straightforward. Physical supply and demand does have an effect – of course it does – but it’s marginal relative to the effect of the supply of credit.

So here’s the good news. Interest rates can barely go much lower, and rules around mortgage lending are tighter than they once were (there are still signs of lenders getting more excitable again but we’re not back in Northern Rock territory yet).

Meanwhile, wages are rising. So overall, rising wages should improve affordability while stable interest rates keep a lid on house price growth.

So we make some headway into the frustration caused by unaffordable homes, while buying ourselves time to take a more considered view and put in place deeper reforms that might put an end to the perpetual cycle of boom and bust.

OK, if I’m honest, I’m not optimistic about that last point – it would require too much long-term thinking. But having a bit of a breather at least from house price woes would be healthy for us all.

By: John Stepek

Source: Money Week

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Will house prices crash after Brexit?

Home owners and prospective buyers alike want to know: will house prices crash after Brexit? With the huge 20 per cent house price fall prediction continuing to circulate on the web, is it really true that there will be a property market crash once we’ve left the EU?

As we’ve reported in our in-depth analysis of Brexit and house prices, while Brexit undoubtedly has affected the property market, the effect has not been uniform across the UK, and Brexit is not the only factor affecting property prices. If we ignore some of the hype that has surrounded discussions of Brexit and house prices, we can start looking at the bigger picture, with more endemic problems surrounding property and the economy coming to the fore.

By far the biggest problem with the UK housing market right now (and for quite some time past) is one of insufficient supply and growing demand. This has been exacerbated by Brexit, with home owners anxiously holding on to properties, reducing the available number of properties further still.

The UK is still massively behind new build targets, which is deepening the housing crisis. For illustration’s sake, the UK has twice the population of Canada, but is building half the number of new homes. So, while house prices are unlikely to crash as such after Brexit, the reasons behind this are not a strong economy, but the economy of scarcity.

The other growing problem with housing is yet another growing borrowing bubble, with some economists already predicting a 2008-style recession in the near future. Property economist Andrew Burrell points to an overinflated property market which is at capacity in terms of growth: ‘It’s just a matter of 30 years’ of falling interest rates, people taking out bigger and bigger mortgages – you’ve now reached the size where it’s probably about as big as we can manage.’

A combination of high levels of debt at low interest rates with stagnant incomes sounds uncomfortably familiar. However, there is one important difference: the UK economy is not currently ‘booming’, as was the case prior to 2008, so any property market slump is unlikely to come in the form of a spectacular crash. What we’re most likely to see is a sluggish property market with slow growth in most areas of the country, and perhaps some further price falls in premium property segments (e.g. central London).

Are you planning on buying or selling a house? Don’t think about Brexit too much and stick to your plans.

BY ANNA COTTRELL

Source: Real Homes