2020: UK Property Market Calmer Waters

20/01/2020
2020: UK Property Market Calmer Waters

2019 was a year that will live long in the memory. As we predicted, from its outset, it was dominated by Brexit. The government’s lack of majority meant their Brexit bill was continually rejected and any kind of compromise seemed impossible. By May, Theresa May was out and we had a leadership contest and a new Prime Minister Boris Johnson.

The result heightened fears over a hard Brexit, but then Johnson surprised us all by getting the EU to agree to an improved deal. When that too was rejected, an election was called and the resulting majority at last gave us a degree of certainty as the year ended and the start of a new year and decade.

What is truly remarkable is, despite all the uncertainty, the housing market showed few signs of buckling, ending the year up 0.8%. There is no doubt, though, that Brexit did dampen both prices and activity as we all sat and waited for any kind of resolution. 2019 began slowly with asking prices rising around 0.5% per month. Spring came and went with only the smallest of bounces (avge. monthly rise 1%). In June, fed up with the whole process, people started buying again.

However, activity and confidence quickly faded and prices fell by 0.45%/month as the new Prime Minister, Johnson, also failed to get his Brexit bill through and we moved into the traditionally quieter summer period. By Autumn, the political chaos was deepening and with an election looming, the market ground to a halt and prices swung in and out of negative territory (+0.8% to -1.3%). With such a clear election result, there was an immediate lifting of sentiment and 2020 now promises to be a far brighter, smoother year.

As ever, there were some quite wide regional variations. Some of the best performing regions were in the North and the Midlands. Asking prices in the Northeast were up by 1.5% and by 1.9% in the East Midlands. The biggest rise was in the Northwest, up by 3.2%. The biggest fall, however, was in London, down by 0.5%, although many commentators are predicting prices in the capital have now bottomed out (source: Rightmove).

So, what should we be expecting from the property market in 2020? There are a number of factors that are likely to play a significant role in the year ahead. On the plus side, there should be considerable pent-up demand being released now that there is more certainty over the political situation. Economic conditions also look like they will remain relatively benign, with high levels of employment, low interest rates and rising average wages.

The biggest headwind though will continue to be Brexit. Only part one of the saga is over. There is still a trade deal to be agreed and negotiations will, no doubt, create a few highs and lows over the coming months and may also prevent the government giving the property market the attention it so needs. There has also been a significant shortfall in the supply of property for sale over the past few years, although that is likely to improve as sellers gain confidence. Overall, stability in the market should be considerably improved and prices should rise, but it may not truly take off until after the trade negotiations have ended.

THE PREDICTIONS

Please note – where possible, final figures for 2019 are from the commentator’s own indices.

Nationwide
Nationwide’s indices recorded growth of 1.4% in 2019, which was impressively close to their prediction of between 1% and 2%. They are predicting prices will remain flat in 2020.

Halifax
At 2% to 4% Halifax’s expectations for 2019 was not exactly specific. Their final figure of 4% was on the high side compared to others, but was a result of a 1.7% post-election surge in December. They have been even less specific this year, expecting continued price growth and increased transactions, but not saying by how much.

Hometrack
Hometrack were another who got their predictions almost bang on last year, with their forecast of 3% growth against an actual figure of +3.4%. This year they again expect prices to rise by 3% and a 2% uplift for London’s house prices thanks to improving affordability levels.

Rightmove
Rightmove predicted average prices would remain flat against a final figure of 0.8%. This year they are expecting prices to rise by 2% nationally and by 1% in London.

RICS (Royal Institution of Chartered Surveyors)
RICS predicted prices would remain flat in 2019 against an average indices rise of around 1%. This year they are expecting growth to rise to 2% and supply shortages to continue.

NAEA Propertymark (National Association of Estate Agents)
43% of NAEA’s agents were expecting prices to fall in 2019 (57% did not), 39% believed supply levels would increase and 35% that demand would drop. In the end, supply contracted and prices rose, on average, by around 1% although demand softened. This year, more than a quarter of agents (28 %) are expecting house prices to fall against 56% who expect them to remain the same. 25% think the number of sales to first-time buyers will increase and 58% expect numbers to remain the same. 32% expect demand to decrease and 28% think supply will increase.1.3%. This year, 43% of agents expect prices to fall, 39% think supply levels will increase and 35% that demand will drop.

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