Flat national prediction brought about by growth in some regions counterbalanced by price declines in others
House price growth in the UK will likely come to a halt over the course of next year as the number of transactions reduces slightly, according to the RICS housing forecast for 2018. However, it should be noted that the national prediction includes price growth in some regions offsetting declines in London and the South East.
Overall levels of activity across the residential sector have been a little underwhelming throughout 2017, with the latter part of the year in particular proving something of a disappointment. The RICS UK Market Survey has recently shown buyer enquires stalling, sales volumes stagnating and sentiment turning altogether more cautious as a result.
The likely theme impacting the behaviour of the housing market over the course of 2018 is again expected to be the overriding issue of supply with stock on estate agents books close to all time lows. As such, there are no signs as yet that 2018 will see a turnaround in supply across the second hand market.
Going forward, and looking at sales activity, the market looks unlikely to breach 1.2 million sales in 2018 with political and economic uncertainty proving a hindrance as well as the lack of stock, stretched affordability, tax changes and interest rate rises.
That being said, there is potentially some upside for activity stemming from changes in Stamp Duty. Following the November Autumn Statement, relative to other buyers, FTB affordability may improve slightly. However, with higher prices offsetting the tax saving, such a small change will have minimal impact in its goal of lifting home ownership rates. In overall terms then, RICS believe the policy change is unlikely to stimulate activity to any great extent.
Tarrant Parsons, RICS Economist, commented:
“Following a pretty lacklustre finish to 2017, the indications are that momentum across the housing market will be lacking as 2018 gets underway. With several of the forces currently weighing on activity set to persist over the near term, it’s difficult to envisage a material step-up in impetus during the next twelve months. However, the fundamentals are not much changed from the end of 2017, so levels of activity should soften only marginally when compared to the year just ending. A real lack of stock coming onto the market remains one of the biggest challenges, while affordability constraints are increasingly curbing demand in some parts. Given these dynamics, price growth may fade to produce a virtually flat outturn for 2018.”
“That said, despite the recent interest rate hike, mortgage rates are set to remain very favourable, with the prospect of further rises seemingly minimal over the coming year. Alongside this, government schemes such as help to buy should continue to provide some support to sales activity,” Tarrant concluded.
Lewis Johnston, RICS Parliamentary Affairs Manager, added:
“2017 was meant to be the year of a Government step-change in housing policy, but it seems we’ll have to wait a little while longer for anything truly transformative to drive up supply. While there have been some policies, such as the recognition of the role of councils in building homes which RICS have long called for, and the package of reforms to support SME builders that should make a change in the market, many of these measures won’t come into effect until the mid-2020s and as our 2018 forecast indicates, they don’t add up to the kind of resolute, large-scale supply strategy we need."