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Housing market outlook weakens – but still demand for new homes
According to Countrywide, the UK’s largest estate agency and property services group, the outlook for the housing market is complicated by uncertainties which have come with the UK’s vote to leave the European Union. Overall, the outlook for both house price growth and transaction levels over the next two years is weaker than before the vote, but there is a wide range of possible outcomes. Those depend on how uncertainty affects confidence in the UK’s economic performance and hence its housing markets.
They expect to see a weaker economy to slow house price growth and transactions as consumer confidence, household incomes and the labour market are affected. They expect UK house price growth to fall to 2.5% in 2016 and to -1.0% in 2017, recovering to 2% in 2018. They say that as affordability has deteriorated, fuelled by an insufficient growth in the supply of new homes, some form of adjustment was always a possibility.
According to Countrywide, the London and South East markets will see the biggest adjustment, particularly at the most expensive end of the scale. Some of that slowdown is unrelated to Brexit. Higher stamp duty is taking its toll and new supply is coming to market. But after several years of double digit price growth, expectations of future capital gain – a key driver of demand- have also weakened.
But the enduring characteristic of the UK housing market remains. When debt is cheap and there are fewer homes than the demographics demand, simple economics dictates that there will be upward pressure on prices and plenty of demand for new build property.
Forecasts are always uncertain, but there are higher than usual risks now because of the extraordinary nature of the challenges ahead. Most risks are to the downside and will be dominated by the UK’s ability to leave the EU in an orderly fashion and maintain its trade links. It isn’t certain, but an orderly exit is in the interest of the EU and indeed global economies.
Visit here for more market insight from Countrywide.
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