It was late May 2016, The Right Hon. Member for Tatton, 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 prophecy? The simple answer is yes and no.
Good
barometers 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 the Land Registry,
property values in Crawley are only 0.17% up month on month (and the month
before that, they had decreased by 0.67%) – 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 Crawley
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
wasn’t smooth and all upward. Crawley property values dropped by an eye
watering 2.11% in February 2013 and 0.53% in December 2014 – and no one batted
an eyelid then.
You
see, property values in Crawley are still 8.75% higher than a year ago, meaning
the average value of a Crawley property today is £322,800. 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 Crawley
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 the Crawley Borough Council area stands at 2,900 people
(4.5%), which is considerably better than a few years ago in 2013 when there
were 4,600 people unemployed (8.2%) 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 Crawley (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 Crawley Property Market, I
will discuss this matter further!
