It was late May 2016, when Mr George Osborne, published
an official HM Treasury analysis stating UK house prices would be lower by at
least 10% (and up to 18%) by the middle of 2018 compared with what is expected
if the UK remained in the European Union. So, eight months on from the
Referendum, are we beginning to show signs of that forecast? The simple answer is yes and no.
A good indicator of the housing market are the share
prices of the big UK builders. Much was made of Barratt’s share price dropping
by 42.5% in the two weeks after Brexit, along with Taylor Wimpey’s equally
eye watering drop in the same two weeks by 37.9%. Looking at the most recent
set of data from Zoopla, property values in Falkirk are up 0.53% in the last three
months – so is this the time to panic and run for the hills?
Doom and Gloom then? Well, let me consider the other side
of the coin.
Well, as I have spoken about many times in my blog, it is
dangerous to look at short term. I have mentioned in several recent articles,
the heady days of the Falkirk property prices rising quicker than a thermometer
in the desert sun between the years 2011 and late 2016 are long gone – and good
riddance. Yet it might surprise you during those impressive years of house
price growth, the growth was not always smooth and always upward. Falkirk
property values dropped at various points during this period and no one
battered an eyelid then.
You see, property values in Falkirk are still 7.92% higher
than a year ago, meaning the average value of a Falkirk property today is £142,781.
Even the shares of those new home builders Barratt have increased by 43.3%
since early July and Taylor Wimpey’s have increased by 37.3%. The Office for
Budget Responsibility, the Government Spending Watchdog, recently revised down
its forecast for house-price growth in the coming years – but only slightly.
The Falkirk housing market has been steadfast partly
because, so far at least, the wider economy has performed better than expected
since Brexit. There is a robust link between the unemployment rate and property
prices, and a flimsier one with wage growth. Unemployment in Falkirk stands at 3,800
people (4.6%) which is considerably better than a few years ago in 2012
when there were 6,800 people unemployed (8.5%) in the same council area.
However, inflation is the only thing that does worry me.
Looking at all the pundits, it will get to at least 3% (if not more) in the
latter part of 2017 as the drop in Sterling in late 2016 renders our imports
with higher prices. If that transpires then the Bank of England, whose target
for inflation is 2%, may raise interest rates from 0.25% to 2%+. However, that
won’t be so much of an issue as 81.6% of new mortgages in the UK in the last
two years have been fixed-rate and who amongst us can remember 1992 with
Interest rates of 15%!
Forget Brexit and yes inflation will be a thorn in the
side – but the greatest risk to the Falkirk (and British) property market is
that there are simply not enough properties being built thus keeping house
prices artificially high. Good news for those on the property ladder, but not
for those first-time buyers that aren’t! In the coming weeks in my
articles on the Falkirk Property Market, I will discuss this matter further!
No comments:
Post a Comment