Despite the shock of the Brexit vote, house prices unexpectedly continued to rise in 2016.
Moving into spring 2017, the average house price in England and Wales is almost £298,000; 2.4% higher than a year ago, proving that despite macroeconomic turbulence, the housing market has stayed resilient.
Getting on the ladder
Last year wasn’t easy for first time buyers. Despite the Help to Buy ISA promising to help potential borrowers save enough to get onto the housing ladder, many hopes were quickly dashed when it was revealed last summer that buyers couldn’t actually put the scheme’s bonus towards a deposit.
Nevertheless, in recent years the government has demonstrated enthusiasm in its appetite to support the housing market.
Since its launch in 2013, David Cameron’s flagship Help to Buy Scheme supported the completion of 95,343 mortgages, arguably paving the way for many lenders to become more comfortable with lending to those with smaller deposits.
As a result, even after the initiative closed to new loans in December, borrowers with 5% deposits have found the market to be amenable.
The increasing availability of high LTV lending has led to more first time and small deposit buyers getting on to the property ladder. In January, this latter group represented 18.7% of the total mortgage market – 4.2% higher than January 2016 – and rising to 20.5% in February.
House price activity
Last year was a year of uncertainty for house prices, in part due to Brexit and the 3% surcharge on Stamp Duty for second homes and buy-to-let properties.
Following the Brexit vote in June, house prices dipped but quickly bounced back. By the time we reached November, the average house price in England and Wales was £295,276, the same as it was in May, marking a recovery to the level recorded immediately before the referendum.
House prices reached their peak in March, ahead of the April introduction of the surcharge on Stamp Duty, which unsurprisingly led to a slight dip in the market.
Despite this, a strong performance in cheaper properties across the country meant that we ended the year with a rise in property prices overall. The average house price in December was £297,678, an increase of £1,139 on the month before.
Annual price growth has been as high as 16.2% in Hull, while falls have been as deep as -11.5% in the London Borough of Hammersmith and Fulham.
What to expect in 2017
Commentators suggest that market uncertainty will continue in 2017 in the aftermath of Article 50 being triggered, and we await the outcome of a proposed second Scottish independence referendum.
However, the government’s Housing White Paper, released in February, should herald good news for the market. The pledge to build a greater number of affordable homes will be a boost to both the construction sector and potential buyers across the UK.
As a result, it’s reasonable to suggest that we should start to see more first time and small deposit buyers purchasing property as home ownership becomes a more realistic prospect for these groups.
The Royal Institution of Chartered Surveyors is predicting that property prices will rise by 3% this year, with key growth areas being the East, the West Midlands and the North West.
Over the past year, Merseyside has seen an increase of 5% and Birmingham 6.2%, compared to London which only had an increase of 2.1%. This demonstrates the growth potential of other cities in the UK and further strengthens the emergence of the Northern Powerhouse.
While the housing market is showing signs of recovery, we are not out of the woods yet in transaction terms. As such, the industry and the government will need to work together to ensure the market remains accessible to those looking to take their first steps onto the ladder or to move into an affordable home.