With RICS finding the housing market subdued, should we brace for falling house prices?
Kay Neufeld, an economist at the Centre for Economic and Business Research (CEBR), says Yes.
With infallible regularity, every year a number of property market analysts predict that “this year prices surely must fall”. Most of the time, they are wrong. Looking at market fundamentals, not much has changed in 2017. The demand for housing in the country continues to outstrip supply, not to speak of the considerable back log that has accumulated over the last decade.
However, at a sub-national level, falling values are not only a possibility but are already a fact for certain property classes in central London and the South. Transaction levels have flat-lined for months – not least because of the hike in stamp duty. In the buy-to-let sector this is compounded by the changes to mortgage interest tax relief and tighter underwriting standards.
While demand for prime London property stands to benefit from the weak pound, overall, we expect further price falls in the inflated markets of London and across parts of the South East for this year.
Delyth Richards, head of investment solutions at Kleinwort Hambros, says No.
Despite falling levels of home ownership, Brexit related fears, fundamentals remain supportive to UK house prices. UK wide, modest house price growth continues with some areas reporting increases. Lack of supply supports prices, notwithstanding changes to tax and relief for buy-to-let landlords.
While transactional volumes remain subdued, the oversupply that accompanied the last housing collapse does not exist; new listings are falling, and supply shortage is a dominant feature of the market.
Interest rates remain at historic lows, and even with projected increases will remain low. There are many fixed-rate mortgage products available and an increasing range of interest-only loans. Sales activity has started to pick up in London after a year of flat growth and, at national level, RICS reports an improvement in outlook.
Currency depreciation makes UK housing attractive to overseas investors, providing further support to the housing market.