When average wage increases are running below inflation and the cost of the average home is well beyond the means of the average first-time buyer on the average wage, market economics, beloved of the Conservative government, dictate that prices must fall. This is a simple paradigm of market dynamics, yet many in the UK feel that it doesn’t apply to housing and that any decline in the house price is the first blast of the trumpets sounding Armageddon (of course, these people already own their homes)!
According to the Royal Institute of Chartered Surveyors (RICS) demand for properties has been falling for the last 12 months and that instructions from people wishing to sell their property (and presumably buy another, in most cases) has declined for seven consecutive months. RICS suggests that house prices have stalled, nationally with the price balance zero, the “worst” performance since February 2013 (unless you hope to get on the property ladder, of course).
RICS measures the confidence in the UK property market in a fairly simplistic manner by comparing the number of surveyors reporting rising prices against those seeing declining sales prices. The decline in prices is most marked in London and the south-east, where property prices are the highest, nationally. In contrast, RICS members report that prices continue to rise in the Midlands and north. As the RICS report puts it:
“London exhibits the weakest feedback, with a net balance of -47% of respondents citing further price declines. Respondents in the south-east, East Anglia, and north-east, also reported prices to be falling but to a lesser extent than in the capital. Meanwhile, prices continue to drift higher across all other parts of the UK, with Northern Ireland, Wales, and the East Midlands seeing the strongest readings.”
An increase in “stamp duty” and uncertainty over Brexit and its economic impact have been blamed for the relative weakness of the London property market. The sector is concerned that should the Bank of England decide to raise interest rates next month, the knock-on effect on higher mortgage rates will exacerbate the slowdown over the near-term.