It was late May 2016, when Mr George Osborne, published
an official HM Treasury analysis stating UK house prices would be lower by at
least 10% (and up to 18%) by the middle of 2018 compared with what is expected
if the UK remained in the European Union. So, eight months on from the
Referendum, are we beginning to show signs of that forecast? The simple answer is yes and no.
A good indicator of the housing market are the share
prices of the big UK builders. Much was made of Barratt’s share price dropping
by 42.5% in the two weeks after Brexit, along with Taylor Wimpey’s equally
eye watering drop in the same two weeks by 37.9%. Looking at the most recent
set of data from Zoopla, property values in Penicuik are up just 0.12% in the
last three months – so is this the time to panic and run for the hills?
Doom and Gloom then? Well, let me consider the other side
of the coin.
Well, as I have spoken about many times in my blog, it is
dangerous to look at short term. I have mentioned in several recent articles,
the heady days of the Penicuik property prices rising quicker than a
thermometer in the desert sun between the years 2011 and late 2016 are long
gone – and good riddance. Yet it might surprise you during those impressive
years of house price growth, the growth was not always smooth and always
upward. Penicuik property values dropped at various points during this period and
no one battered an eyelid then.
You see, property values in Penicuik are still 2.43%
higher than a year ago, meaning the average value of a Penicuik property today
is £176,040. Even the shares of those new home builders Barratt have
increased by 43.3% since early July and Taylor Wimpey’s have increased by
37.3%. The Office for Budget Responsibility, the Government Spending Watchdog,
recently revised down its forecast for house-price growth in the coming years –
but only slightly.
The Penicuik housing market has been steadfast partly
because, so far at least, the wider economy has performed better than expected
since Brexit. There is a robust link between the unemployment rate and property
prices, and a flimsier one with wage growth. Unemployment in Midlothian stands
at 1,800 people (4.1%) which is considerably better than a few years ago
in 2012 when there were 3,100 people unemployed (6.9%) in the same council
area.
However, inflation is the only thing that does worry me.
Looking at all the pundits, it will get to at least 3% (if not more) in the
latter part of 2017 as the drop in Sterling in late 2016 renders our imports
with higher prices. If that transpires then the Bank of England, whose target
for inflation is 2%, may raise interest rates from 0.25% to 2%+. However, that
won’t be so much of an issue as 81.6% of new mortgages in the UK in the last
two years have been fixed-rate and who amongst us can remember 1992 with
Interest rates of 15%!
Forget Brexit and yes inflation will be a thorn in the
side – but the greatest risk to the Penicuik (and British) property market is
that there are simply not enough properties being built thus keeping house
prices artificially high. Good news for those on the property ladder, but not
for those first-time buyers that aren’t! In the coming weeks in my
articles on the Penicuik Property Market, I will discuss this matter further!
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