Sunday, 13 November 2016

House price growth to flatline in the short term


The weather is certainly changing. Last week, locally we saw the first snow and the frosts are coming in thick and fast. It certainly feels like a time to be pulling down the blinds, getting out the blankets and wishing for warmer climates. The same could be said about house prices.
 
The average UK house price remained unchanged in October, not too unsurprising given it is expected that house price growth across the board will flatline across the next two years. The Nationwide published their latest house price index and simply it showed that average price was £205,904 compared to £206,015 the month before – a minor slip but it’s negligible, and still approximating to six times average annual earnings. Not to spread any fear but the last time the prices/earnings ratio was this high was around March 2008 (and we all remember what happened next!) as house prices have grown by 20% versus a wage growth figure of 6% - feeling squeezed?
 
Despite this there is a reassurance that house price growth will resume in due course (rather than crash). The predictions for example of JLL are 0.5% in 2017, 1% in 2018 and then up to 4% in 2020 compared to Savills of 13% over the next five years. Hard to imagine a further 13% house price growth (though will do wonders for my retirement fund!). The interesting point is Savills predict rental will increase faster than house price growth – good news for the vast waves of new properties out there for rent, but also clearly is showing the shift towards Generation Rent. In fact rents are forecast to increase by 19% versus 13% for house prices – though this is clearly a challenge for anyone looking to enter the housing market.
 
There is a shining hope in the form of offsite manufacturing which could put a huge dent into the housing crisis, or at least at the affordable part of the crisis. The construction resurgence is showed through NHBC revealing new homes registered is at its best levels since 2007 with 18% being affordable homes. With offsite shaking off its poor reputation the Government has given it a boost with a strategy change by embracing pre-packed homes. The aim is to target younger buyers with more details expected in next months White Paper (or maybe even as part of Autumn Statement 2016).
 
The benefits of pre-packed or “modular” homes are clear – quicker to build and it’s cheaper. The certainty of housing market over the next few years is hazy but one thing is true, housing is needed and therefore is a need to innovate the sector to keep Britain building and housed.

 

 

 


 





 

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