How will the Value of your Property Change in 2019?

Affordability was one of the main pressures in the UK housing market over the past year, even at low price points. So, how will the value of your property change in 2019?

In 2018, few buyers were searching for properties, particularly in big cities, while not many owners were putting their homes on the market, leading experts to regularly describe the industry as “subdued”.

Even when a property sale had been agreed, deals were “taking longer to get over the line”, according to Simon Rubinsohn, the Chief Economist at the Royal Institution of Chartered Surveyors (RICS).

A recent survey by the Centre for Economics and Business Research (Cebr) suggested that homes in cities and major towns were on the market for an average of 102 days before being sold or put under offer last year. This was six days longer than in 2017.

The expectation among industry commentators is that there will be more of the same in 2019; the market will keep moving, but slowly, reports the BBC.

Properties will go onto the market, partly the result of death, debt or divorce, while people will still have to move for work or schools, or because they are attracted by a discount.

Potential buyers, however, might struggle to get a new mortgage, owing to strict lending criteria, or might choose to renovate or extend their homes instead of relocating.

All of those factors, and more, mean that most of the commentators that the BBC spoke to are predicting relatively little change in the value of property in 2019.

“In short, the market will continue to tread water,” believes Capital Economics’ Andrew Burrell.

Property value predictions

• Richard Donnell, the Property Market Analysis at Hometrack: +3%
• Andrew Montlake, of mortgage broker Coreco: +1% to +2%
• Henry Pryor, housing market expert: -5%
• Miles Shipside, of Rightmove property portal: 0%
• Andrew Burrell, of Capital Economics: +1%
• Simon Rubinsohn, of the RICS: 0%
• Russell Galley, of mortgage lender Halifax: +2% to +4%

These predictions show an average for UK house prices, but each expert pointed out that the picture could vary significantly in different parts of the country. It can even vary in different neighbourhoods of the same town.

“Trying to sum up the health of the UK’s 27m homes is impossible,” admits Pryor.

Donnell explains: “There are pockets where local economies are weak and this is acting as a drag on house prices.”

Burrell believes that property values in London could fall by an average of 5% this year, but rise everywhere else.

At a hyper-local level, the performance of a school or the prevalence of crime can affect house prices.

Nationally and internationally, there is one major issue that could have a huge impact on the housing market:

Brexit

In its most recent monthly survey, the RICS suggested that there was an unprecedented dominance in the commentary of surveyors on one single issue: Brexit.

“Uncertainty created by the Brexit process is causing buyers and sellers to sit tight in increasing numbers,” it says.

The Bank of England (BoE) believes that the impact of the UK leaving the EU on the housing market could be significant. Its various scenarios indicate what could happen, not necessarily what is most likely to happen, as a result of Brexit.

House prices could decrease by up to 30% from their pre-Brexit levels if there is no deal, or a so-called disorderly Brexit, the Bank claims. That compares with a peak-to-trough drop of 17% on the average UK property value as a result of the financial crisis ten years ago.

“It is worth stressing that this modelling from the Bank was undertaken for financial stability purposes,” Rubinsohn points out. “Some of the assumptions behind the disorderly Brexit scenario seem implausible to us.”

If the UK’s exit is “disruptive”, then the BoE says that the fall in house prices could be up to 14%.

Clearly, it is tough to predict the outcome of Brexit, so the effect that it might have on property is even more difficult.

Pryor believes that the transition phase of Brexit will simply add to uncertainty: “If you think that the housing market foundations are shaky now, then I suspect we ain’t seen anything yet.”

Montlake feels that some certainty over an EU-UK deal could mean a steady outlook for the housing market: “Whichever way Brexit goes, the UK is still a stable country compared to many others, and an end to all the current uncertainty will make a huge difference.

“There is also potentially something to be said for buyers to have property investments outside the EU which could then go through a particularly bumpy time.”

2018 was as difficult as ever for many young people hoping to buy a home, due to strict lending controls, issues with affordability, and a lack of secure employment. However, these problems have been primarily seen in the big cities, especially London.

Nevertheless, first time buyers were still the most active group in the UK property market in 2018, according to Hometrack. The Government’s Help to Buy schemes have helped more than one in ten of them purchase newly built homes, in particular.

In contrast, existing homeowners with mortgages saw little reason to move last year. Sales among this group were at their lowest level for a decade. Owners took the safety-first approach, by deciding not to move and take on a larger mortgage, but to stay put, take advantage of historically low home loan rates, and reduce their overall level of debt.

In normal circumstances, with the BoE expecting interest rates to rise only in small increments, the same might be expected in 2019.

But the current political situation is not normal, and that makes predicting the UK housing market particularly tough. The commentators that the BBC spoke to a year ago were generally accurate in forecasting house price growth in 2018. They may not have the same confidence in their expectations this time around.