How have prices and rents performed this year versus forecasts?
People always want to know what’s going to happen to property prices. For landlords, the experts’ forecasts can play a big part in helping you decide what to do moving forward: should you buy more investment property; is it time to sell or is it better to concentrate your budget on upgrading your existing properties?
But before we rely too heavily on what the experts are predicting, it’s worth checking just how accurate the ‘official’ forecasts were for 2018, to get an idea of how likely they are to be right in the future.
It’s important to bear in mind that this kind of forecasting is very tricky. That’s mainly because the housing market can be heavily impacted by consumer confidence, which can go up and down as a result of just one piece of news reporting or a one-off national or international event. With all the continuing uncertainty around Brexit, 2018 was a particularly hard year for the forecasters to predict.
House price forecasts for 2018
The most widely-quoted experts all forecasted growth for this year. Two of the most prominent were very optimistic:
• In April 2017, the Centre for Economics and Business Research (CEBR) predicted growth of 4.1% for the UK in 2018. However, this was before the snap general election had been announced and before the extent of the Brexit complications had started to impact on consumer confidence.
• In July 2017, PricewaterhouseCoopers (PwC) took a view across the three years from 2018 to 2020 and forecasted that annual price growth would average 3.9% per year. Their prediction for Greater London alone was also optimistic at 3.9% because, although the prime central market had cooled, prices had been performing well outside the city centre.
Meanwhile, at the other end of the spectrum:
• In November 2017, the Bank of England Inflation Report stated: ‘The outlook for the housing market remains fairly subdued ... In the near term, price inflation and activity in the housing market are projected to remain well below past averages, broadly consistent with the outlook for income and consumption’.
• Also in November, 43% of NAEA Propertymark’s member agents said they expected house prices to fall in 2018.
How are annual growth figures looking currently?
If we take the latest complete house price data from the UK House Price Index and compare it with PwC’s predictions for the regions and countries, it’s clear that growth is broadly similar to what was forecasted for England and Wales, while Scotland has done much better than expected
The rental market
As a result of the increased tax burden on buy-to-let investors, it was predicted that fewer new landlords would enter the market in 2018 and that supply would begin to decrease as some existing landlords would decide to sell up. While that should have the effect of pushing up rents, a lack of wage growth affecting affordability for tenants meant that 2018 was expected to be a fairly stagnant lettings market.
Looking at the latest rental data for June, from the Office for National Statistics, the market is broadly performing as expected – slow, steady growth. In the year to June, rents in the PRS rose by 1% in England, 1.1% in Wales and 0.6% in Scotland.
Although we’re only halfway through the year and prices may pick up through the next six months, it seems likely that ongoing uncertainty over Brexit is likely to keep consumer confidence subdued. Nevertheless, as all investors know, the regions are full of micro-markets and property prices can perform very differently, even from one street to the next. So focus on your local market, taking advice from good local agents and checking the latest sold property price data online.
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