One of the UK’s leading group of economic experts has repeated its warning that housing market is not going to see any significant improvement at all in the second half of the year.
The EY ITEM Club, a group of economists whose reports are routinely considered by ministers and the Bank of England’s monetary policy committee, says that while housing market activity has come off its 2018 lows, “it is still relatively limited and finding it hard to gain traction amid challenging conditions.”
The Club says it is unlikely that “any meaningful upturn” will take place over the next few months and by the end of 2018 house prices will on average be 2.0 per cent higher than a year earlier.
“At this stage, we expect prices to rise no more than 3.0 per cent in 2019” it says.
The Club’s latest statement continues: “Housing market activity is expected to remain lacklustre as the extended squeeze on consumer purchasing power only gradually eases, confidence is relatively fragile and appreciable caution persists over engaging in major transactions. Potential house buyers may also be concerned that they are likely to face further interest rate hikes over the coming months.”
But it says any pressure for house prices to fall is being limited by a shortage of houses for sale.
“High and currently rising employment is also supportive for the housing market while mortgage interest rates are at historically low levels and will remain so even if the Bank of England does hike rates modestly over the coming months” it says.
Meanwhile the latest Halifax house price index suggests that growth has cooled further; prices rose 1.8 per cent in the three months to June. In June alone, house prices rose 0.3 per cent after a sharp 1.7 per cent jump in May.
“We’re seeing a market in subdued mode supported broadly for some time by low interest rates and unemployment, and more specifically by low stock. We’ve reached the limit of what many buyers can afford so this is not a correction, more a realignment of prices to reflect changes in circumstances and to address the potential standoff between buyer and seller” explains Jeremy Leaf, north London agent and former RICS residential chairman.