Economist Howard Archer of EY Item Club warns that the housing market will be driven by the Brexit saga this year:
- If the UK ultimately manages to leave the EU with a “deal” at the end of March, we expect UK house prices to eke out a modest gain of 2% over 2019. A likely gradual pick-up in consumers’ real income growth should help the housing market in 2019, while high employment, still low interest rates and a shortage of houses on the market will also likely offer some support
- If the UK leaves the EU at the end of March without an approved Brexit “deal”, house prices could fall by around 5% in 2019 amid heightened uncertainty and weakened economic activity
- If Brexit is delayed, ongoing uncertainty is likely to weigh down on the housing market and could well see house prices stagnate or even fall slightly
Mark Harris, chief executive of mortgage broker SPF Private Clients, also blames economic anxiety for the house pries slowdown.
‘Uncertainty seems to be the main issue plaguing the housing market, with potential buyers and sellers sitting on their hands and waiting to see what happens with Brexit.
This means lenders should be offering attractive deals to anyone seeking a mortgage, he adds.
North London estate agent Jeremy Leaf says the UK housing market is “struggling to weather the Brexit storm but not collapsing”
The average UK house now costs almost £220,000, Nationwide reports, around £5,000 less than last summer.
Good news for first-time buyers, of course.
Introduction: UK house prices stagnate
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
Britain’s housing market is feeling the chill from Brexit, with prices stagnating as economic uncertainty builds.
New figures from Nationwide show that prices are only 0.1% higher than a year ago, down from 0.5% annual growth in December.
That’s the lowest annual growth rate since February 2013.
The average house price is now lower than in the summer, even though prices rose 0.3% in January after a sharp fall in December.
It’s another sign that the economy is feeling the pressure, with less than two months until Britain is due to leave the EU.
Robert Gardner, Nationwide’s Chief Economist, says annual house price growth “almost ground to a complete halt in January”.
Gardner blames the “uncertain economic outlook” for dragging the housing market down.
“Indicators of housing market activity, such as the number of property transactions and the number of mortgages approved for house purchase, have remained broadly stable in recent months, but forward-looking indicators had suggested some softening was likely.
“In particular, measures of consumer confidence weakened in December and surveyors reported a further fall in new buyer enquiries towards the end of 2018. While the number of properties coming onto the market also slowed, this doesn’t appear to have been enough to prevent a modest shift in the balance of demand and supply in favour of buyers in recent months.
With a touch of understatement, Gardner adds that the economic outlook remains “unusually uncertain”. Bu he’s hopeful that prices might pick up this year if economic conditions hold up.
If the economy continues to grow at a modest pace, with the unemployment rate and borrowing costs remaining close to current levels, we would expect UK house prices to rise at a low single-digit pace in 2019.”
Reaction to follow….
Also coming up today
Italy might fall into recession this morning! New eurozone GDP figures, due at 10am, may show the euro area’s third-largest member contracted by 0.1% for the second quarter in a row.
The wider eurozone is only expected to have grown by 0.2%.
European stock markets may make gains, following a strong rally on Wall Street last night after the Federal Reserve said it would be patient about raising interest rates again.
- 9am GMT: Italian GDP for Q4 2018
- 10am GMT: Eurozone GDP for Q4 2018
- 1.30pm GMT: US weekly jobless figures