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We’re constantly being told that if there’s one thing that markets don’t like it’s uncertainty. So, what will Brexit and a hung Parliament mean for the housing market? Inflation is on the rise so what will the Bank do about interest rates? We take a snapshot of where we are and what observers are saying.

The most recent figures from HM Land Registry show that house prices have continued to rise across the country. In the year to April 2017, prices grew nationally by 5.6%[1]. There are some interesting regional variations however. The fastest price growth has been in Scotland – 6.8% for the year to April 2017 – whilst growth was lower in all three other nations of the UK for the year as a whole.

But some observers think that the market is slowing down. Nationwide, the UK’s largest Building Society, says that prices have been falling for some time. In its monthly house price report for May, it says that prices have fallen for three months in a row and that the annual rate of increase slowed to 2.1% in May[2].

Halifax agrees, by and large, although it calculates the average annual price growth as 3.3% in the year to May. The Halifax House Price Index says that the average house price fell by 0.2% in the three months to May 2017, in spite of an unexpected rise of 0.4% in May.

Observers are divided about the reasons for the slow down but agree that political uncertainty is unlikely to be a factor. Nationwide says that past general elections have not generated any volatility in the housing market, and Halifax puts weaker market activity down to ‘Rising inflation and weak wage growth, together with higher stamp duty tax rates for buy-to-let and second-home purchases’[3]. One commentator writing in The Guardian points out that consumers are not afraid of making other ‘big ticket’ purchases, such as cars and says that ‘The likeliest explanation for the muted state of the property market is that houses are simply too expensive for first-time buyers, even with mortgage rates as low as they are.’[4] According to the Office of National Statistics, the average house now costs 7.6 times the average national annual income – and where houses are more expensive such as in London and the South East, the differential between prices and average earnings is obviously much greater. This is borne out by the fact that since 1996, the percentage of 25-29 year olds owning their own home declined from 55% to 29% in 2015.[5]

So, what of the future? Nationwide thinks that house prices are unlikely to start rising again any time soon, whilst Halifax is slightly more upbeat: ‘The fact that the supply of new homes and existing properties available for sale remains low, combined with historically low mortgage rates and a high employment rate, is likely to support house price levels over the coming months.’[6]


[1] https://www.gov.uk/government/publications/uk-house-price-index-summary-april-2017/uk-house-price-index-summary-april-2017

[2] http://www.nationwide.co.uk/~/media/MainSite/documents/about/house-price-index/2017/May_2017.pdf

[3] ibid.

[4] https://www.theguardian.com/business/2017/apr/09/zero-house-price-inflation-is-to-be-welcomed-not-feared

[5] http://visual.ons.gov.uk/five-facts-about-housing/

[6] https://static.halifax.co.uk/assets/pdf/mortgages/pdf/May-2017-Halifax-House-Price-Index.pdf