The year has already kicked off in an interesting way, with political shenanigans and a new Independent Party, increasingly mixed economic news and a whole load of pure speculation that everything will be OK and we will motor forward or everything will go wrong!
The truth will always be somewhere in the middle, but we see no reason to get downbeat. In fact, most people seem to want to get on with their lives and this is especially true in the Housing Market.
We have already seen First-Time Buyers coming back into the market over the past few months, proven by the fact that UK Finance has reported that the numbers of these buyers reached a 12-year high last year.
Elsewhere we get the feeling that some of the pent-up demand is starting to release, as many realise they cannot put their lives on hold forever. Despite the dreaded B-Word, many still want to move out of home, move in with a partner, start a family, move to that elusive school catchment area or, sadly, get divorced. We are also, still not building enough of the right type of homes in the right areas
Yes, life goes on and trying to play the market is always fraught with danger. We would always recommend you make a move when it is right for you in your life, rather than when you think the market is right. Because quite frankly, we only really know that with hindsight.
What ultimately happens in the wider economy depends on so many things we can’t ultimately control. As for all the negative, often sensationalist comments in the press? Well, we believe that most of this is put out there by people just trying to get noticed and it is important we present to all our clients an open and honest assessment of the market.
UK house prices
Any kind of prediction at all in the face of the unique position we find ourselves in is fraught with danger, but leaving aside any further unforeseen events, the pace of growth looks relatively clear.
Like this year, house price growth will vary dramatically between regions, with some experiencing higher growth than others, where slight falls could still occur.
Whilst London & the South East seems to have had its share of price falls, particularly in Prime Central London, there is a feeling that this is starting to recover, with buyers looking for good deals once more. In many areas now it feels very much like a “buyers market”.
There has been a resurgence in overseas buyers in London, buoyed by the weakness in the Pound and a belief that property prices will bounce back over the next 5 years. Whichever way Brexit goes, the UK is still a stable country compared to many others and an end to all the current uncertainty will make a huge difference. Once people know exactly what situation they face, decisions around property purchases can be made. In fact, any removal of uncertainty will have a positive effect on house prices.
There is also potentially something to be said for buyers to have property investments outside of the EU which could then go through a particularly bumpy time. You would also see the Government desperate to showcase the UK as a place to invest and we could see a wealth of tax changes and laws put in place to encourage this.
Overall, however, I suspect we will see a pretty flat market with house prices in 2019 increasing slightly around the 1% to 2% level, with growth improving into 2020 and beyond.
Interest Rates & The Economy
The overall economic environment will continue to have an effect on house prices, but outside of this, regulation, interest rates and mortgage affordability will also play their part.
There is no doubt that some borrowers are going to find things getting a little tougher if interest rates do rise. We have been used to the prevailing low-interest rates for so long now that higher rates have a more dramatic effect than they usually have.
Despite his “unreliable boyfriend” tag, the Bank of England Governor Mark Carney will not wish to deviate from his proclaimed course and continue the gentle pace of interest rate rises, with one or two rises of 0.25% easing rates up over the next 12 months. It would, however, be a tad more helpful if he could say anything more then the next interest rate rise could be up, or it could be down. I guess that is why he is paid the big bucks!
Mortgages & Affordability
Mortgage availability is expected to remain robust whilst, with only gentle interest rate rises predicted and a big increase in competition between mortgage lenders, rates should remain at attractively low levels.
The biggest issue is affordability stress testing which was introduced to ensure affordability in the future at around 3% above current rates. If this is not changed when rates increase, then it will prove problematic for many more people to pass these stringent rules.
Hopefully, as rates rise this stress will reduce as risk reduces proportionally.
The good news is we are already seeing more innovation, more lenders willing to lend to the self-employed, freelancers and contractors as well as more choice for those older borrowers. Even those with a credit blip now have much more to look at.
Those looking to Remortgage really are spoilt for choice, with lenders falling over backwards to get your business.
Even Buy to Let Landlords are being welcomed in from the cold by mortgage lenders, with some of the cheapest rates ever seen in this section of the market.
Overall, it looks like 2019 will be very different from dour, moody 2018. I’d go so far as to say we are cautiously optimistic!