House price sentiment slips in May according to new report

House price sentiment slips in May according to new report
The UK needs to boost the supply of homes where they are most needed, and this is one area where the Government could make progress, even if other hurdles remain for a minority government

The latest research and housing market analysis from Knight Frank takes a look at what has been happening in the wake of the recent political developments in the UK.

The unexpected UK election result has led to a week of political negotiations as the Conservatives try to form a government. While this has prompted increased levels of uncertainty, there was a relatively modest reaction in the financial markets to the result amid hopes in the city that the country could be heading for a slightly “softer” Brexit. As yet, there is still little in the way of detail about what the Brexit deal will look like, but this will likely become clearer as negotiations get underway on Monday 19th June.

Yet the political situation is being exacerbated somewhat by recent economic data indicating that inflation is rising and that wage growth is lagging. This week, the news that three members of the Bank of England's rate-setting committee, which is currently made up of eight people instead of nine as a replacement for Charlotte Hogg is appointed, voted for a rate rise, caused a sharp rise in sterling.

Economists had not been expecting an interest rate rise until early 2019, given the relatively benign inflation rate environment
up until now. Policymakers are also keen to maintain a stable rate environment as the country prepares to leave the EU.

However, the recent inflation data, and the tone of the minutes of the Monetary Policy Committee's meeting, indicate that modest rate rises may be on the cards earlier than this.

The Bank of England will also be watching the US closely – where the Federal Reserve has raised the base rate for the fourth time since 2015, taking it to 1.25%

The election also forced a ministerial re-shuffle. In terms of housing, Gavin Barwell, the former housing minister, lost his Parliamentary seat. However, he has been appointed as the chief of staff in Number 10, which could indicate that housing is unlikely to fall off the agenda. His replacement, Alok Sharma, comes from a financial background and sits on the Treasury Select Committee. In terms of the Housing White Paper, which was published earlier this year, there are still hopes that more detail will be announced in the Autumn Budget as Sajid Javid remains the Sectretary of State for DCLG and is in a position to push this agenda.

The UK needs to boost the supply of homes where they are most needed, and this is one area where the Government could make progress, even if other hurdles remain for a minority government.

Meanwhile, house price growth continued to slow in May, although the market remains highly localised. Affordability remains a key concern in many markets, and this, coupled with increased economic uncertainty, is weighing on price growth. However, at the same time, ultra-low mortgage rates and a lack of supply are putting a floor under pricing.

Prime market update

Average prices in prime central London were flat in May, and are down 6.6% on the year. The rate of price declines has
eased in recent months – on a quarterly basis, average values slipped by 0.2% in the three months to the end of May, compared to a 4.1% decline in the final quarter of last year.

In the country market, the latest data on prime house prices showed values were broadly flat in the year to the end of March, with outperformance in many key urban locations. In Scotland, prime values across the country dipped by1.2% in the year to March, while in Edinburgh, prime prices were up 3%.

Rental market

Average rents across Great Britain rose by 1.8% in May, with a 1.9% increase in England. UK rents have been in positive territory since the ONS started its index in 2011.

Rents in the prime central London market, with the Knight Frank index reflecting rents for existing prime and super-prime homes, are down 4.8% on the year, although this marks an easing of the decline compared to a 5.2% fall in the year to December last year.

The size of the private rented sector (PRS) across the UK is expected to continue to grow, with Knight Frank forecasting that around 5.8 million households will be living in the PRS by the early 2020s. This, and other emerging trends in the PRS, is examined in more detail in our latest PRS research.

Gráinne Gilmore, Head of UK Residential Research, Knight Frank, says; "With the appointment of the tenth housing minister in ten years, housing needs to remain close to the top of the agenda, so policies can be implemented to boost the supply of homes where they are most needed.”

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Tony Gimple
Tony Gimple 09 Dec 2017

Linking professionalism to limited company borrowing is a flawed concept. Despite S24 etc., limited companies are the most tax inefficient way of running a property business and leave borrowers seriously...

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Evelyn Attwood
Evelyn Attwood 01 Dec 2017

It's normal. If you plan to buy a house in one of the most beautiful spots in the country you should pay a high price.

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Evelyn Attwood
Evelyn Attwood 01 Dec 2017

I think that the situation will be the same at December.

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Scott Garnet
Scott Garnet 06 Nov 2017

If you have a patio or a porch it is important to make sure that any connecting doors are secured. Good advice for sliding glass doors is replacing the panels with storm resistant glass and getting heavier...

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richardrawlings 01 Nov 2017

What has not been mentioned here is the effect of not only higher interest payments, but also that these payments are less likely to be offsettable as a business cost due to the scaling back of mortgage...

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Kelvin Lloyd
Kelvin Lloyd 09 Oct 2017

IT is up, to the Planners. If they will only give permission for bungalows on certain (suitable) sites, they will be built.

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maggie swift
maggie swift 09 Oct 2017

It's just the beginning of the shocking rise.

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maggie swift
maggie swift 09 Oct 2017

I have recently read that the bungalows can provide social housing for elderly residents in London.

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zoe glover
zoe glover 05 Oct 2017

Update! Worst company I have ever dealt with. Undervalued a Cambridge property by over 100k, wont take on any evidence of valuation including a RICS valuation done 3 years ago for the very same value...

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Paul Edwards
Paul Edwards 27 Sep 2017

Its nonsense articles such as this that make it harder to get clients to realise just how difficult the market is out there. When you see Rightmove and there are more 'price reduced' then 'new' most days...

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Tom Allen
Tom Allen 20 Sep 2017

Absolutely agree with you!

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RyanGeo 18 Sep 2017

A sharp correction would be a less dramatic expression to use. That is already underway in certain sectors in Reading where I practice as Chartered Surveyor

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