Brexit has given forecasters a headache when predicting what will happen to the residential property market in 2019.
Most are cautiously optimistic, though this is countered by a warning from the Bank of England that an “absolute worst case scenario”, disorderly no-deal Brexit could lead to recession and a 30 per cent fall in house prices.
Robert Gardner, Nationwide's chief economist, agrees that much will depend on how broader economic conditions evolve: “In the near term, the squeeze on household budgets and the uncertain economic outlook is likely to continue to dampen demand, even though borrowing costs remain low and the unemployment rate is near 40-year lows.
“If the uncertainty lifts in the months ahead and employment continues to rise, there is scope for activity to pick-up through next year. The squeeze on household incomes is already moderating and policymakers have signalled that, if the economy performs as they expect, interest rates are only expected to rise at a modest pace and to a limited extent in the years ahead.”
Savills believe that the north will fare better than the south in 2019 and beyond and is sticking by its prediction that Yorkshire could see the second highest house price growth in Britain over the next five years.
It says that our region may see average house prices rise by 2.5 per cent in 2019 and by a compound total of 20.5 per cent by 2023. The national average predicted increase for the UK is 14.8 per cent.
Lucian Cook, head of residential research at Savills, said: “The traditional north-south divide will turn on its head, with the Midlands, North and Scotland expected to see the strongest increases.”
Savills say that Brexit will continue to impact sentiment over the short term, particularly in London and its commuter belt, but local market affordability is expected to determine price growth long-term.
Knight Frank is also optimistic in its Yorkshire forecast but has based it on a Brexit deal being agreed.
The region is the second best performer in its five-year table with a 12 per cent compound growth in values between 2019 and 2023. The North East is top with a predicted 13.6 per cent rise. The UK five-year average is 10.3 per cent.
Yorkshire's trajectory begins with a 0.5 per cent rise next year; one per cent in 2020; three per cent in 2021; 2.5 per cent in 2022 and 4.5 per cent in 2023.
Grainne Gilmore, Head of Residential Research at Knight Frank, says: “When looking to the future, the Brexit noise can threaten to drown out everything else. It is worth putting in some earplugs to examine the other fundamentals of the housing market, as these too will determine what happens in the years to come.
“As affordability in some parts of London has become stretched, price growth has slowed, and reversed in some areas.
“However, in other parts of the country, price growth continues apace. This is the case in Wales and the Midlands, where affordability ratios are more measured.
“Many of the UK's cities are also seeing strong levels of growth. We expect this to continue, with price growth in London slightly underperforming the UK average over the next five years, largely due to prices dipping in the capital this year and next. In contrast, price growth in the North East and Yorkshire is expected to be the strongest.”
Knight Frank expect a ‘relief bump' when the country leaves the EU and believe that house prices will most likely continue to rise over the long-term.
“By 2023, house prices will have lagged behind wage growth for several years and will likely return more closely to the average annual growth rate of six per cent seen over the last 20 years,” says Grainne.
“Mortgage payments are one of the key measures of affordability. As such, changes to interest rates are another key factor in market movements. There is every chance that interest rates will rise further in the coming years. They are likely to be moderate, with the Office for Budget Responsibility forecasting that interest rates will be at 1.5 per cent in 2023.”
JLL has also based its assumptions on the UK agreeing a Brexit deal. It expects Yorkshire house prices to rise by one per cent next year, 0.5 per cent in 2020; two per cent in 2021; 3.5 per cent in 2022 and three per cent in 2023. This brings the total increase over the next five years to 10 per cent.
JLL analysts say the average UK house prices will edge up by 0.5 per cent in 2019 and its UK five-year forecast is 11 per cent.
Over at Strutt and Parker, the regional UK prediction is 2.5 per cent average house price growth for 2019 but they add: “Beyond 2019 it is extremely difficult to forecast this market with any certainty but we would expect some bounce back once more stability has returned.”