House Price Growth Slows Awaiting Potential Brexit Turbulence

Q4 Data from Nationwide’s House Price Index has shown annual house price growth to slow to its weakest speed since February 2013.

Despite the context of a year of economic growth seeing employment rate grow to a record high of 75.7%, employee wages seeing their fastest growth in 10 years, and low borrowing costs, there is a national slowdown on house price growth. Nationwide’s Chief Economist Robert Gardner attributes this to the economic uncertainty within the market:

“It is likely that the recent slowdown is attributable to the impact of the uncertain economic outlook on buyer sentiment … the economic outlook is unusually uncertain. However, if the economy continues to grow at a modest pace, with the unemployment rate and borrowing costs remaining close to current levels, we would expect UK house prices to rise at a low single-digit pace in 2019″

Those worried about the slowdown in growth should leave room for relief given the prediction from Pantheon Macroeconomics Chief UK economist Samuel Tombs that should a Brexit deal be agreed upon, prices would rise steadily by 2%, bring growth closer to the average rate of the last decade:

“The hefty month-to-month fall in house prices in December [of 0.7%] – the biggest Nationwide has reported since August 2011 – brings an end to a weak year for the housing market … while the supply of homes for sale also has dwindled, the balance of demand and supply has shifted in buyers’ favour. That said, we continue to doubt that a sustained period of falling house prices is likely.”

A possible shifting of dynamic can be seen looking at the prices of house growth across regions as London sees negative growth while the North West has a near 5% growth (the highest of all regions).

This could be attributed to the property boom within major North West cities such as Manchester, thanks to the city’s high graduate retention rate (51% of graduates remaining within the city) and continued investment in property developments. Investment management company JLL predicted that Manchester property prices could see 22.8% growth by 2022.

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