Prices to rise 0.5% amid unpredictable times

JONES Lang LaSalle (JLL) residential research director Neil Chegwidden said in a Nov 1 press release that British housing outlook is unpredictable and house prices are expected to increase by 0.5% next year, and 1% in 2018.

“We are expecting the British housing market to slow from current levels both in terms of transactions and price growth next year. This will be driven by Brexit uncertainty and a slightly softer economy,” says Chegwidden.

“The outlook, however, is particularly unpredictable presently,” he says.

Chegwidden says over the next couple of years, JLL is expecting periods of volatility in terms of household and business sentiment as the Brexit road map unfolds. However, the underlying shortage in supply will provide support in value terms, he says.

On Thursday, the British High Court ruled that the government must seek parliamentary approval for triggering Article 50. This will be a setback for the government’s Brexit timetable. These are the sort of uncertainties highlighted by the Bank of England and more bumps are expected ahead.

JLL’s latest November forecasts conclude that Brexit will dominate British housing markets over the short to medium term. However, it expects the market to remain reasonably strong and active due to its current housing shortage even as Brexit and the uncertainties it throws up continue to unfold.

Transaction levels are expected to decline from about 1.22 million this year to 1.08 million next year, an 11% fall, as uncertainty causes households to defer house purchase decisions. However, JLL predicts that the softer market conditions will encourage more young British first-time buyers to get onto the housing ladder.

JLL is concerned about the Brexit impact on housing supply as house builders will inevitably exercise greater caution when times are more uncertain.

Despite government initiatives, Chegwidden is forecasting England housing starts to slip from around 140,000 homes in 2016 to 134,000 next year and in 2018.

In London, we expect housing starts to fall from around 18,000 homes in 2016 to 16,000 next year, having reached 23,700 starts in 2015, Chegwidden says.

He continues: “Both new leaders Theresa May and London mayor Sadiq Khan have expressed their concern about a lack of housing supply and affordability. Both have addressed this fundamental and vital issue. Both are seeking answers. It will be interesting to see whether policy initiatives target short-term supply improvements or look beyond the immediate horizon to create lasting, long-term solutions. Given the likely Brexit uncertainty over the next few years we believe that policy makers will be wisest to look long-term.”

Housing supply and delivery remain high on the political agenda, across the country and in London. There are no simple, viable solutions. However, the next 12 months should see renewed impetus, fresh ideas and new policies, starting with the imminent housing white paper, Chegwidden says.