The housing sector in United Kingdom is showing signs of early recovery as prices of houses in the country rose by about 1.4 per cent in December 2019 compared to the beginning of that year. This is despite the fact that London, the premium most segment of the housing market in the United Kingdom, continued to be in a slump while smaller far flung markets are performing relatively better. The data provided by Nationwide Building Society comes on the heels of several other leading economic indicators that have reversed their trends and started to turn northwards towards the end of last year.
The past couple of years have been a period of uncertainty and turmoil for the British economy. The decision of United Kingdom the leave the European Union brought with its unprecedented complexities that had not been anticipated by either side. While sufficient time has been taken by either side to make the actual parting of ways, now popularly known as Brexit, as less painful as possible, the constant bickering and disagreements on key issues on either side has left much to be addressed and resolved. These complications, while affecting business sentiments on either side, also took its toll on the average British consumers to the effect that they started to curtail their spending. Many indicators like consumer credit offtake, retail spending data, consumer confidence data as well as housing prices data took a southward dip as a consequence and continued that trend all through the period till October 2019 when general elections were announced in the United Kingdom.
The housing market in the United Kingdom, which is divided into several zones, has on several occasions showed that the market is quite different from one geography to the other. The Scotland market was the strongest performer among all witnessing a price growth of 2.8 per cent in the last quarter of 2019 and then there was the West Midlands which recorded the second highest price increase for the year at 2.7 per cent. However, in the London market, on the other hand, prices actually shrunk in the fourth quarter of 2019 by about 1.8 per cent. The Nationwide Housebuilding Society report also stated that the transaction levels in the housing market throughout the year 2019 had been at a historic low and that the average price of a United Kingdom home in December 2019 was £215,282.
Robert Gardner, the chief economist at Nationwide Building Society, while commenting on the numbers and inferences drawn, stated that the economic activity had been quite volatile throughout the year 2019 which initially would suggest being the reason behind the very slow price growth performance of the United Kingdom’s housing market in the recent past but what actually appears are the weak global economic conditions that have impacted the property market for the much of the last year. While on the subject he also played down the “Boris Bounce” phenomenon that was being suggested from several quarters in United Kingdom that property prices would rise in 2020 on account of Prime Minister Boris Johnson being re-elected in the December 2019 general elections. Instead, he suggested that housing market prices in 2020 will depend on the broader economic issues of how the actual Brexit event unfolds and on the global economic cues that seem to be getting worse lately. The British economy is expected to expand fairly modestly in 2020 with housing prices remaining fairly flat throughout, with the above two being the key economic drivers to look out for.
IHS Markit owned Halifax House Price Index which is United Kingdom’s longest running house price index series based on Halifax mortgage transaction data and has been calculated since January 1983 had risen the most in December 2019 in monthly terms in nearly 13 years, registering a growth of 1.7 per cent during the month from the levels of November 2019. On a year-on-year basis however, the price index rose by 4 per cent for the month, its largest such increase since February of 2018. It is important however, to note that the index covered the full month of December during which the general elections in the United Kingdom took place, giving Prime Minister Boris Johnson a thumping majority and enough leverage to implement his poll plank promises.
Halifax’s managing director Russell Galley, while commenting on the numbers, said that clarity regarding the economy will be able to spur a greater number of transactions in the housing market in forthcoming months resulting in the growth of prices, emphasizing on the victory of Prime Minister Johnson to help alleviate a lot of political and economic uncertainties. He also stated that currently the difficulty faced by prospective buyers in raising funds is acting as one of the key factors that is constraining demand in the sector and consequently on the prices of properties.
On 18 December 2019, the Office of national Statistics of the United Kingdom published its monthly UK House Price Index for the month of October 2019 . The data showed that United Kingdom house prices increased by 0.7 per cent over the year to October 2019 to stand at £233,000, the lowest registered since September 2012. The Average prices of houses in England in the month was £249,000 registering a growth of 0.5 per cent over the previous month, the average prices of houses in Wales stood at £166,000 which is a growth of 3.3 per cent over the previous month, the average price of houses in Scotland stood at £154,000 registering a growth of 1.4 per cent over the previous month and the average prices in Northern Ireland stood at £140,000 registering a growth of 4 per cent. In terms of annual growth rate, London remained the slowest growing market in United Kingdom with prices falling by 1.6 per cent over the year to October 2019, down from 0.8 per cent registered in September 2019, while still retaining the priciest property market in all of United Kingdom.
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