It was late May 2016, The Right Hon. Member for Tatton, Mr
George Osborne, published an official HM Treasury analysis stating UK house
prices would be lower by at least 10% (and up to 18%) by the middle of 2018
compared with what is expected if the UK remained in the European Union. So, eight
months on from the Referendum, are we beginning to show signs of that prophecy?
The simple answer is yes and no.
Good barometers of the housing market are the share prices
of the big UK builders. Much was made of Barratt’s share price dropping by 42.5%
in the two weeks after Brexit, along with Taylor Wimpey’s equally eye watering
drop in the same two weeks by 37.9%. Looking at the most recent set of data
from the Land Registry, property values in Maidenhead are only 0.02% up month
on month (and the month before that, they had seen a decrease of 0.22%) – so is
this the time to panic and run for the hills?
Doom and Gloom then? Well, let me consider the other side of
the coin.
Well, as I have spoken about many times in my blog, it is
dangerous to look at short term. I have mentioned in several recent articles,
the heady days of the Maidenhead property prices rising quicker than a thermometer
in the desert sun between the years 2011 and late 2016 are long gone – and good
riddance. Yet it might surprise you during those impressive years of house
price growth, the growth wasn’t smooth and all upward. Maidenhead property values
dropped by an eye watering 1.06 in November 2012 and 0.73% in March 2014 – and
no one batted an eyelid then.
You see, property values in Maidenhead are still marginally higher
than a year ago, meaning the average value of a Maidenhead property today is £553,600.
Even the shares of those new home builders Barratt have increased by 43.3%
since early July and Taylor Wimpey’s have increased by 37.3%. The Office for
Budget Responsibility, the Government Spending Watchdog, recently revised down
its forecast for house-price growth in the coming years - but only slightly.
The Maidenhead housing market has been steadfast partly
because, so far at least, the wider economy has performed better than expected
since Brexit. There is a robust link between the unemployment rate and property
prices, and a flimsier one with wage growth. Unemployment in the Windsor and
Maidenhead Borough Council area stands at 2,600 people (3.4%), which is considerably
better than a few years ago in 2013 when there were 3,500 people unemployed (4.7%)
in the same council area.
However, inflation is the only thing that does worry me. Looking
at all the pundits, it will get to at least 3% (if not more) in the latter part
of 2017 as the drop in Sterling in late 2016 renders our imports with higher
prices. If that transpires then the Bank of England, whose target for inflation
is 2%, may raise interest rates from 0.25% to 2%+. However, this may not be an
immediate issue for some as 81.6% of new mortgages in the UK in the last two
years have been fixed-rate……..and who amongst us can remember 1992 with
Interest rates of 15%!
Forget Brexit and yes inflation will be a thorn in the side
– but the greatest risk to the Maidenhead (and British) property market is that
there are simply not enough properties being built thus keeping house prices
artificially high. Good news for those on the property ladder, but not for
those first-time buyers that aren’t!
