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UK house prices growth ‘grinding to a halt’

UK house prices rose three per cent last month just before the coronavirus outbreak hit, according to Nationwide figures released today.

But the bank warned housing market activity is “grinding to a halt” as the coronavirus lockdown stops buyers and sellers from viewing properties.

Banks have also withdrawn mortgages or made it tougher to secure mortgages, also dampening UK house prices.

Coronavirus means outlook ‘highly uncertain’

“Housing market activity is now grinding to a halt as a result of the measures implemented to control the spread of the virus,” Nationwide’s chief economist Robert Gardner said.

“Indeed, a lack of transactions will make gauging house price trends difficult in the coming months.

“The medium-term outlook for the housing market is also highly uncertain, where much will depend on the performance of the wider economy.”

The UK is facing a severe economic retraction as a result of the coronavirus crisis. The government has closed all shops save supermarkets, pharmacies and banks.

And people are able to leave the house once per day to exercise, while maintaining two metres distant from others.

“Economic activity is set to contract significantly in the near term as a direct result of the necessary measures adopted to suppress the spread of the virus.,” Gardner added.

The value of British homes rose 0.8 per cent on a monthly basis in March, up from February’s 0.3 per cent change. And its three per cent annual growth rate outpaced February’s 2.3 per cent growth.

That left the average UK house price at £219,583 in March.

UK house prices growth ‘meaningless’

Jeremy Leaf, north London estate agent and a former RICS residential chairman, called today’s UK house prices figures “academic” in light of coronavirus.

“However, they do raise expectations that when restrictions begin to ease, hopefully relatively soon and without too much damage to the economy, there is every chance that activity will pick up nearly where it left off,” he added.

“We are finding that only those industries particularly badly affected by coronavirus are having to pull out of transactions, such as those working in the travel, hospitality or entertainment industries.”

But Lucy Pendleton, founder director of independent estate agents James Pendleton, painted a darker picture. She said UK house prices were now “irrelevant” with the coronavirus outbreak. Pendleton has put more than half its estate agents on furlough, and last week house sale numbers slumped 84 per cent.

“It wasn’t so long ago that commentators talked of Brexit uncertainty putting transactions on ice but that feels like ancient history now,” she said. “Covid-19 has brought brutal new meaning to a frozen market.”

Lenders back away from mortgages

Mark Harris, chief executive of mortgage broker SPF Private Clients, added that “lenders remain keen to lend”.

That is despite some having to pull back from high loan-to-value deals. Nationwide yesterday tightened measures on mortgage applications and no longer takes bonuses and overtime pay into account.

Nationwide also pulled its mortgage offering for low-deposit borrowers earlier this week.

Lloyds Banking Group, which owns includes Halifax and Scottish Widows and is the UK’s largest lender — has capped lending at 60 per cent of loan to value.

And Barclays has put a cap on how many mortgage applications it will accept from brokers. It has also limited high loan to value mortgages.

“In most instances this is a temporary move while they get to grips with the inability to carry out valuations, plus redirect their staff to deal with mortgage payment holiday enquiries,” Harris said.

UK house prices ‘will recover quickly’

“The only silver lining to this situation is that political uncertainty and underlying economic weakness play no part in this chaos,” Pendleton added. “The housing market will come roaring back to life as soon as the lockdown ends, aided by interest rates that are significantly lower than when it began.”

However, it is unclear how long the coronavirus lockdown will weigh on UK house prices.

“This crisis has ripped staff and customers from our hands,” Pendleton added. “Coronavirus has broken the spirits of businesses on a scale not seen since the financial crisis. It is an incredibly testing time but we must come out the other side, and come out fighting.”

By Joe Curtis

Source: City AM

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Northern Ireland set to enjoy strongest UK house prices growth

NORTHERN Ireland is set to enjoy the strongest growth in house prices in the UK over the next four years, with residential property prices predicted to lift from their current average value of around £128,000 to reach £154,000, according to PwC’s latest UK Economic Outlook (UKEO).

The report points to the local market being more resilient than the rest of the UK, where there will be some softening of national property price growth between now and 2022.

Data on annual property price growth reveals thatNorthern Ireland is currently the seventh highest among the UK regions, with PwC forecasting the region will rise to third in 2019 and will top the list by 2022.

But even if prices do increase at this rate, they will still be around 28 per cent lower than the 2007 pre-recession average.

The UKEO says the the Northern Ireland economy is set to growth by a mere 0.8 per cent in 2018 and around 1.2 per cent next year – still well below the forecast UK average of 1.3 per cent and 1.6 per cent, making it the slowest-growing of the UK’s 12 regions.

PwC NI chairman and UK head of regions Paul Terrington said: “The Northern Ireland property market continues to perform better than expected, with a positive balance between earnings and house prices. But prices remain well below their peak level in 2007, and this gap is unlikely to close in the near future.

“We have also considered the effect of future interest rate rises, and believe that only around 11 per cent of UK households would be immediately affected if rates increased.”

The PwC report also highlights the impact that artificial intelligence (AI) may have on UK employment in the two decades to 2037 and, while estimates suggest the overall net effect will be broadly neutral, this is not true for individual sectors.

The most positive effect is seen in the health and social work sector, where PwC expects the number of jobs to increase by nearly one million, equivalent to around 20 per cent of existing jobs in this sector.

On the other hand, the report estimates that the number of jobs in the manufacturing sector could be reduced by around 25 per cent due to AI and related technologies, representing a net loss of nearly 700,000 jobs.

Applying this formula across the UK regions suggests that the impact on Northern Ireland will be broadly neutral, amounting to a net loss of around 4,000 jobs by 2037, considerably less than other industrialised regions.

Mr Terrington said the overall outlook for 2019 was mixed, adding: “The UK economy held up well in the six months after the EU referendum, but growth slowed from early 2017 and continued into early 2018, while higher inflation has squeezed real household incomes, which has taken the edge off consumer-led growth.

“The stronger global economy should continue to have some offsetting benefits for net exports this year, although there are downside risks in 2019 and beyond if recent US tariff policy changes were to escalate into a wider international trade war.

“Brexit-related uncertainty and the absence of any UK-EU agreement may also continue to hold back business investment across the UK while the absence of an Executive and the continued uncertainty around post-Brexit border controls impacting inward and indigenous investment and general business confidence.”

He went on: “The next 12 months will be crucial for Northern Ireland’s medium-term growth, but as at today, the signs are not especially hopeful.”

Source: Irish News