According to data from the Halifax Bank, average UK house prices for September 2017 showed modest growth month on month (0.8%), quarter on quarter (1.4%) and year on year (4%). While this is positive news, there are three points property investors should remember when considering it.
Averages are made up of the sum of all parts
While there are various ways of calculating averages, the basic idea behind all of them is much the same; you add up a range of values and then look for the value which is best representative of that range. Average house prices in the UK are made up of sales in places such as Manchester and Salford, which still have buoyant housing markets together with sales in places such as London and the south east, where the market is much slower. UK Property investment is still a viable option, however investors should investigate local housing markets carefully before deciding whether or not they represent good value at this time.
Interest rates are still low
While the Bank of England has hinted that interest rates may go up at some point in the near future, the fact still remains that interest rates are a controversial topic. In theory, if inflation breaches its 2% target, the BoE will have very little option other than to raise interest rates. In practice, the BoE will probably be acutely aware that a rise in interest rates will increase the effective cost of living of anyone who carries any form of debt, including mortgage-holders and so even if rates do have to be raised, the BoE will probably still tread softly, even if it does carry a big stick.
Employment remains high
Even though some media outlets like to prophesy doom and gloom, the fact is that the flexibility of the UK’s labour laws is a major attraction to employers and helps to keep employment in the UK at high levels. While it may be fair to say that some people in some areas of some professions may feel under threat from Brexit, these people only form a small proportion of the UK’s workforce. High employment is clearly a positive for a strong housing market.
High demand (compared to supply)
There must be very few parts of the UK, if any, where the supply of property outstrips demand. For the most part, the question is one of how much demand outstrips supply, which is why property in large, metropolitan areas has traditionally commanded a premium. The most obvious example of this is the London property investment market, which has long been a byword for the highest property prices in the UK. Over recent times, however, the London property market has slowed while the various markets in the north of England have forged ahead. Some might see this as the result of Brexit, while others might point to the fact that for all the house-price inflation of recent years, prices in the north are still very affordable, particularly when compared to those in the south and that the London property market was arguably due some time off to cool.