By Jonathan Cable
LONDON (Reuters) – British house prices will continue their upward climb in coming years as fears of a messy split from the European Union have waned and expectations for ongoing loose monetary policy supports demand, a Reuters poll found.
Nationally, prices will rise 2.0% this year, 2.8% next year and 3.1% in 2022, medians in the Feb. 17-28 poll of 26 housing market experts showed, much steeper than predicted in a November survey.
“It is anticipated that some of the uncertainty that has held back the UK housing market over the past year will begin to lift with the result that we see some modest pickup in house price inflation,” said Peter Dixon at Commerzbank.
Prime Minister Boris Johnson won a decisive victory in an election in December, strengthening his position, and all Reuters economic polls since a narrow majority of Britons voted to leave the EU in June 2016 have said the most likely future trading regime will be an EU-UK free-trade agreement. [ECILT/GB]
But the prospect of no deal being reached by the end of 2020 will weigh on the property market, 19 of 25 respondents to an extra question said.
“The housing market doesn’t respond well to uncertainty. People do nothing rather than something, which brings the market to a standstill,” said property market consultant Henry Pryor.
Growth has been tepid in recent quarters and, with the coronavirus outbreak threatening to derail the global economy, the Bank of England is not expected to increase borrowing costs until 2022 at the earliest, easing the burden on buyers with a mortgage.
Fears the coronavirus will stoke the next global recession have raised expectations for a coordinated policy response by central banks so UK interest rates could fall further.
However, homes are still seen as slightly overvalued. When asked to describe the level of house prices on a scale of 1 to 10 from extremely cheap to extremely expensive, the median response was 6.
In London, the median rating was 8. With prices set to rise 2.0% this year and next, there will not be any respite for people looking to buy in the capital.
The average asking price for a home in London was around 630,000 pounds ($805,203) last month, property website Rightmove said, almost six times the average UK annual salary, putting dreams of getting on the property ladder out of reach for many.
Still, British lenders approved the highest number of mortgages for house purchase in nearly four years in January, Bank of England figures showed on Monday, confirming a pick-up in consumer demand at the start of 2020.
When asked what was most likely for London housing market activity over the coming year, around two-thirds of respondents replied by saying an acceleration rather than a prolonged period of sub-par activity followed by a recovery or a slowdown.
It was a similar split when asked the same question about activity nationally.
“While the direction of travel in the near-term is clear, the size of that gain is not,” said Hansen Lu at Capital Economics.
“House prices are still high relative to incomes, while mortgage interest rates are unlikely to fall further. That means the housing market is still constrained by limited deposit availability, loan-to-income limits and a lack of homes for sale.”
(Polling by Tushar Goenka and Nagamani Lingappa, Editing by Timothy Heritage)