UK’s Biggest Mortgage Lender Predicts New House Price Rises On Tight Supply

Some Christmas cheer for owners of investment properties as Halifax Bank, part of Lloyds Group, the UK’s biggest mortgage lender, predicts new property price rises of between 2% and 4% next year. Headline figures that the worst case no deal Brexit scenario could see house prices tumble by up to 30%, recent tax rule changes creating a tougher environment for landlords and reports suggesting a slowdown in prices and sales are likely to have all given owners of investment properties cause for concern over the course of 2018. Against that backdrop, a well-informed forecast that average prices will actually trend back up again over 2019 will likely come as a relief.

It does have to be mentioned that the Halifax forecast is for the scenario that a smooth Brexit is achieved in March. However, the fundamentals of low building activity and a lack of properties on the market would suggest that even if Brexit is messy, including a no deal scenario, any negative impact on valuations should prove temporary and be compensated further down the line as the situation stabilises.

2018 has been the slowest year in 6 for average house price growth, with only 0.3% recorded on average countrywide. However, there has been significant regional variation within that. Falling prices of more expensive properties in London and the South East have balanced out strong growth in other regions. Halifax had predicted growth of between 0% and 3% for the year with actual figures coming in at the low end of that scale. The mortgage lender maintains that has been the result of Brexit uncertainty and when that passes, whether sooner or later, the subsequent pace of price growth will accelerate to compensate.

House building activity is picking up, and has been at its highest pace since before the financial crisis this year. However, there is still a significant shortfall compared to the population’s needs. One thing that investors do need to be aware of is the affordability of mortgages. If interest rates are brought up significantly that would be expected to counterbalance price rises by making monthly repayments more expensive.

However, with seemingly strong fundamentals underpinning UK house prices, property investors who are able to dip into the market might find rich pickings in the case of a tumultuous no deal Brexit. Temporary fear could see prices drop sharply but longer term supply constraints would be expected to mean that prices show strong medium to long term potential.