UK house prices seem to have shrugged off the Brexit effect. The number of estate agents’ signs being posted outside UK homes seems to have proliferated since the election in December, and now there is an air of renewed confidence in the UK housing market that was not there before.
This is reflected in the latest data from Halifax, which shows UK house prices are up 2.8% for the month of February. This represents a month on month increase of 0.3%. The average UK home is now valued at GBP 240,677.
Growth in UK house prices has looked steady this year
Growth in the value of UK housing has been steady ever since the start of the year. Halifax said it was seeing a sustained level of buyer and seller activity that was not there in 2019. The UK has now officially left the EU, and there has been something of a sigh of relief in the UK property market, but there are also further storm clouds on the horizon.
Halifax says it is hard to gauge the impact of the coronavirus but as this could significantly damage UK economic activity this spring, there could also be a knock on effect on UK house prices.
The house view here at The Armchair Trader is that the spread of coronavirus will slow down as the weather warms up, as it follows the dynamics of traditional flu. The damage to the UK economy is going to be harder to quantify but is likely to feed through into UK house prices.
Mortgage approvals data supports house prices gain
Mortgage approvals data is supporting the price growth numbers published by Halifax. Lender Octane Capital has conducted its own risk review of the UK property market following the general election result and is lowering the rate on its larger lender, developer exit and refurbishment loans by up to 2% per annum.
“Like other lenders we regularly review the macroeconomic outlook and felt especially compelled to do so in the New Year following the decisive general election result,” explained Mark Posniak, Managing Director with Octane Capital. “Our in-house view is that a new environment of greater political certainty will see a lot of pent up demand for property come through, with subsequent upward pressure on prices.”
Posniak said he believed the Bank of England will counter any continued economic weakness with more monetary easing which could provide an additional boost to UK property prices going into Q2.
Buyer sentiment is going to be crucial here. We have seen a couple of months of activity since the end of the Christmas holiday period which has supported the thesis that the UK house buyer is coming back into the market. The coronavirus is not going to help UK house prices in the short term and we are not expecting March numbers to look as good as February’s.
That said, for buyers that are still contemplating an entry into UK housing as an investment before a possible post-Brexit boom the numbers do illustrate that the appetite is there. The coronavirus will, if anything, provide investors with a few more months to pick up some bargains before the market picks up in the summer.