Uncertainty surrounding the UK’s EU referendum appears to be weighing on house price confidence, despite ongoing growth.
The latest House Price Sentiment Index from Knight Frank and Markit Economics shows that households across the UK perceive that the value of their home rose in April. While still positive, however, April’s reading was a slight decline compared to March, indicating that households think the rate of house price growth has slowed marginally.
The slightly weaker sentiment surrounding the housing market follows a period of soaring activity, as buyers and investors sought to complete purchases ahead of the 1st April deadline for the new stamp duty surcharge on additional homes.
“Activity across the market may now become more muted, and in addition, the debate around the EU Referendum may convince some buyers to adopt a wait-and-see approach,” comments Gráinne Gilmore, head of UK residential research at Knight Frank, although she predicts that the underlying fundamentals of low supply and high demand will continue to push up values.
The future HPSI, which measures what households think will happen to the price of their property over the next year, also slipped back in April compared to the previous month.
While still indicating that households across the UK expect the value of their home to rise over the next 12 months, April sees the lowest reading recorded by the index so far this year – sentiment on future house price growth was lower in nine of the eleven regions covered by the index month-on-month, with the biggest fall in sentiment occurring in the East of England.
Tim Moore, senior economist at Markit, adds: “This divergence between relatively brisk current price momentum and softer expectations ahead in part reflects heightened uncertainty about the near term economic outlook.”
UK house prices soar ahead of EU referendum
7th April 2016
UK house prices continue to soar, despite the EU referendum looming on the horizon.
The latest Halifax House Price Index shows that property prices rose 2.6 per cent in March 2016, offsetting February’s fall of 1.5 per cent.
The average price is now £214,811, with values in the first three months of 2016 10.1 per cent higher than the same three months in 2015 – higher than the 9.7 per cent annual rise recorded in both January and February. Indeed, the 10.1 per cent annual growth is the highest for some time, with increases mainly falling within the range of 8 per cent and 10 per cent in the last year.
Flat prices have helped to fuel that growth, notes Halifax, with apartment values rising more sharply than those for other property types since 2008, according to separate research (57 per cent, compared to 37 per cent for all residential property types). A majority of that growth is driven by London, with apartments represent a higher share of the market than elsewhere.
The underlying factors, though, remain unchanged: there is not enough supply to meet demand from buyers. That was especially true in the first quarter of 2016, as investors rushed to beat the 1st April deadline for the introduction of a new stamp duty surcharge on second home purchases (including buy-to-let investments).
“Current market conditions, however, remain very tight with an acute supply/demand imbalance continuing despite an improvement in the number of properties coming on to the market for sale in recent months,” comments Martin Ellis, Halifax housing economist. “This, together with continuing low interest rates and a healthy labour market, indicate that house price growth is set to remain robust.”
That short-term burst of activity was enough to cancel out any potential uncertainty surrounding the UK’s EU referendum in June, which experts say may slow down housing activity in the coming months.
Nicholas Finn, executive director of the buying agents Garrington Property Finders, comments: “The Brexit elephant in the room has yet to make its presence felt. Though these March figures are the first from the Halifax to show price growth after the referendum was announced, any impact it may have had has clearly been swamped by the stamp duty stampede.
“However as June approaches, the uncertainty created by a potential EU exit is likely to have a chilling effect on the frothiest parts of the market. It’s more than a year since the Halifax last recorded annual price growth in double-digits, and we shouldn’t expect it to stay this high for long.”Google+