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seems to be dominating the agenda.
While Brexit has not yet had a major impact on the UK housing market, it is now being suggested that due to the decision to leave the European Union and the start of the official process set to get underway with the triggering of Article 50 by the end of March the outlook for real estate is likely to be subdued.
Part of this might be due to a slow November and with the festive season upon us the market is generally slower in December too, although there will be of course a certain amount of regional variation. But there will be a Brexit effect when Article 50 is launched as major political events do have an effect on property markets and then further uncertainty as details of the deals start to be confirmed.
What we have to remember is that the housing market has outperformed expectations following the referendum in June. The latest sentiment report from Knight Frank says that on most measures the mainstream UK market continues to perform strongly with annual price growth likely to end this year at 5% and most regional markets have seen positive growth with the exception of Wales.
However, looking ahead to next year the analysis suggests that the slowdown in prices which has been evident in central London over the past 12 months will spread to the wider region, with Greater London prices down marginally in 2017 and this trend is likely be experienced across the rest of the country with price growth down notably on 2016 levels.
Experts seem to agree that the main drivers for weaker market performance relate to economic uncertainty surrounding the Brexit process. On top of this is a weaker buy to let market with landlords facing tougher lending conditions from 01 January and then a gradual reduction of tax relief on their mortgage payments from April 2017.
In the mainstream housing market Knight Frank predictsthat overall price growth will fall from 5% in 2016 to just 1% in 2017, then picking up again with a rise of 2.5% in 2018, 3% in 2019 and 2020 and 4% in 2021.
But there is likely to be regional variations. In London price growth is expected to fall by 1% in 2017 compared to a rise of 7% this year, then pick up to growth of 2% in 2018, 2.5% in 2019, then 3% in 2020 and 5.5% in 2021.
In Scotland the growth of 2% for 2016 is set to fall to just 0.1% next year, then up 2.3% in 2018, 2.7% in 2018, and 2.8% in in 2020 and 2021. But these calculations do not take into account any effect of a possible second referendum on independence.
Wales is likely to see a more subdued market over the next five years. Prices will have fallen by 0.5% in 2016, according to the forecast, then remain flat in 2017 before rising by 2% in 2018, and by 2.5% in 2019 but then fall again with growth slowing to 2% in 2020 and 2021. New listings for UK properties fell by 4.7% in November but the figures is much higher than the fall of 12% recorded in activity in the same month in 2015.
However, it is interesting, as Nationwide chief economist David Gardner has pointed out, that growth is still in line with the current upward trend prevailing since early 2015. Indeed, there are some signs that, despite the uncertain economic outlook, demand conditions have strengthened a little in recent months, reflecting the impact of solid labour market conditions and historically low borrowing costs.
It is good news that mortgage approvals increased in October, and surveyors report that new buyer enquiries have increased modestly. The relatively low number of homes on the market and modest rates of housing construction are likely to keep the demand/supply balance fairly tight in the months ahead, even if economic conditions weaken, as most forecasters expect.
So going into 2017 it would appear that the housing market is in surprisingly good health and ready to absorb more uncertainty when the Brexit process officially gets underway.
Ray Clancy
Editor Property Wire
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