Financial and professional services firm JLL’s latest forecasts predict North West house prices will rise by 2% next year – 4 times the UK average of 0.5%.
A report released yesterday, on November 1st, concludes that Brexit will dominate UK housing markets over the short to medium term but predicts that the market will remain reasonably strong and active despite the greater uncertainty and slower economy resulting from Brexit.
JLL are forecasting that UK house prices will increase by 0.5% next year with a further 1% growth in 2018 with transaction levels and house price growth to increase more strongly from 2020 post-Brexit.
House price growth is predicted to rise to 5% pa by 2021 as greater certainty returns to the nation following Brexit. Transaction levels are forecast to decline from around 1.22m this year to 1.08m next year, an 11% fall, as uncertainty causes some households to defer house purchase decisions. However, JLL predict that the softer market conditions will encourage more first-time buyers to get onto the housing ladder, especially as interest rates will be so enticing.
In summary, the report states:
‘Housing supply and delivery remain high on the political agenda, across the country and in London. The next 12 months should see renewed impetus, fresh ideas and new policies, starting with the imminent housing white paper.
The perennial issue for the housing industry remains supply and we are pleased that there seems to be fresh impetus in this regard. The big question, however, is whether policy initiatives target short-term supply improvements, or look beyond the immediate horizon to create lasting, long-term solutions.
The path towards Brexit will dictate what happens in the UK housing market over the next few years. However, although we expect some turbulence, we believe the housing market will remain reasonably strong and active. Demand will be undermined in the short-term by uncertainty and a more subdued economy while supply issues will exacerbate, lending support to prices.’
Neil Chegwidden, Residential Research Director at JLL, comments: “We are expecting UK housing markets to slow from current levels both in terms of transactions and price growth next year. This will be driven by Brexit uncertainty and a slightly softer economy. The outlook, however, is particularly unpredictable presently. Over the next couple of years we expect periods of volatility in terms of household and business sentiment as the Brexit roadmap unfolds but the underlying shortage in supply will provide support in value terms.
“JLL are very concerned about the impact that Brexit will have on housing supply. JLL welcome fresh and new rhetoric from policymakers both nationally and in London, but believe that it will be very difficult to even maintain current levels of housebuilding given underlying conditions. Housebuilders will inevitably exercise greater caution when times are more uncertain. Despite government initiatives JLL are forecasting England housing starts will slip from around 140,000 homes in 2016 to 134,000 next year and in 2018.
“In London we expect housing starts to fall from around 18,000 homes in 2016 to 16,000 next year, having reached 23,700 starts in 2015.”
Neil Chegwidden continues: “Both new leaders Theresa May and Sadiq Khan have expressed their concern about a lack of housing supply and affordability, and both have been vocal about addressing this fundamental and vital issue. We know that both are actively seeking answers and it will be interesting to see whether policy initiatives target short-term supply improvements or look beyond the immediate horizon to create lasting, long-term solutions. Given the likely Brexit uncertainty over the next few years we believe that policymakers will be wisest to look long-term.”
Housing supply and delivery remain high on the political agenda, across the country and in London. There are no simple, viable solutions. However, the next 12 months should see renewed impetus, fresh ideas and new policies, starting with the imminent housing white paper.
Adam Challis, Head of Residential research at JLL concludes: “The housing agenda has broadened to include a wider range of tenures that will impact the market going forward. This has been a positive shift from Government as we need to address current housing needs and not just ambition. Focusing on the supply story rather than demand will be vital.
“To double construction rates, Government will need to look long-term. Industry capacity will decline rapidly over the next decade, creating critical challenges of labour availability and skills. A focus on unrealistic targets during this parliament could derail policy from these bigger fixes.”
JLL also provided a snapshot of the UK economic forecast: