The housing market “is clearly currently struggling to gain traction” and any real upturn ”will remain elusive over the coming months” according to top economists.
The EY Item Club, a group of influential economists who regularly feed in their thinking to the Bank of England’s monetary policy committee, says house prices by the end of 2018 will have risen only by an average of 2.0 per cent.
The group’s chief economic adviser, Howard Archer, says housing market activity remains weak, especially in the light of the Bank of England reporting that mortgage approvals for house purchases edged down further to a 2018-low of 62,455 in April.
This is some 23.3 per cent below the long-term (1993-2018) average of 81,399.
“The further dip in mortgage approvals in April – albeit slight – looks particularly disappointing given housing market activity had likely been adversely affected in March by the severe weather. April’s mortgage performance indicates that housing market activity remains subdued as it pressurised by still limited consumer purchasing power, fragile confidence and likely further gradual Bank of England interest rate rises” explains Archer.
He says: “There seems little evidence that cutting stamp duty for first-time buyers in the late-November’s Budget has yet provided a noticeable boost to housing market activity.”
Archer adds: “The fundamentals for house buyers are likely to remain challenging. Consumers have faced an extended serious squeeze on purchasing power, which is only gradually easing. Additionally, housing market activity remains hampered by fragile consumer confidence and a limited willingness to engage in major transactions.
“House buyers will also likely be concerned about further interest rate hikes over the coming months. We suspect that the Bank of England is more likely than not to increase interest rates later this year and Bank of England Governor Mark Carney has indicated that the UK should prepare for ‘a few interest rate rises over the next few years’.”
However, Archer says the downside for house prices should be limited by the shortage of houses for sale, by high levels of employment, and by broadly low interest rates even if these increase slightly later in 2018.
The EY Item Club’s gloomy report is only the latest in recent weeks to make depressing reading for agents and the wider public alike.
Earlier this month the consumer group The HomeOwners Alliance issued a report describing the market as being “broken at every level” with affordability the biggest single issue to some 2,000 people who were questioned. Some 66 per cent of those who did not own said they wanted to buy, but homes were simply too expensive.
Meanwhile the Royal Institution of Chartered Surveyors’ latest monthly market snapshot reported that agents are currently conducting fewer appraisals than a year ago, alongside figures showing declining buyer demand and flat sales.
And Home, a website that monitors the housing market through an analysis of Rightmove listings, says an excess of supply and high asking prices are combining to stall the market. It claims that the number of properties getting discounted is now close to a six-year high.