Claims that the growth in house prices has slowed because of post-Brexit uncertainty have been revisited after official figures showed an upward trend at the end of 2016.
According to the Office of National Statistics, the average house price rose by 7.2% to £220,000 in December 2016 – £15,000 more than in December 2015 and £3,000 more than November.
December’s figure was the first acceleration in house price growth when the referendum vote and changes to stamp duty impacted the figures. It is also unusual for the time of year where typically the industry expects a fall in activity.
While experts have commented extensively on an expected slowdown in growth due to the economic uncertainty that Brexit has given us, a number of factors appear to have accelerated growth in December. It is thought this could be attributed to the low interest rates, a hearty performance from the UK economy – and the continued housing shortage.
Prices in England have upped the overall UK average – with growth of 7.7% to £236,000 in 2016. Growth in Wales by contrast was just 4.7% to £148,000, while growth in Scotland was 3.5% to £142,000.
Experts are now divided as to what will happen to prices over the coming year. A popular opinion is that growth will still slow, once the costs of rising inflation are felt by households – and homeowners in premium areas such as London reach their maximum borrowing limit.
The number of transactions from first time buyers has risen rapidly over the past year, while transactions from buy-to-let landlords and existing homeowners have slowed. Schemes such as Help to Buy, together with highly attractive mortgage rates, are likely to have boosted first time buyer activity.
The Council of Mortgage Lenders have revealed that in 2016, £53.6 billion was loaned to first time buyers – a 13.5% increase on 2015 and the highest level since the Council began compiling data in 2006. December was another first – with a record £4.8 billion loaned to first time buyers.
The Office of National Statistics revealed that the biggest house price growth is in commuter towns. Basildon saw a 17.3% rise in 2016 to October, with average prices reaching £304,188. Regionally in England, the East fared the best for growth with a rise of 11.3% to £282,000.
However, some homeowners may find that despite the growth in transactions, their properties are not selling as expected. A recent analysis conducted by Which? Found that a fifth of homeowners selling their property in England and Wales were forced to reduce the asking price by 5% because of an overvaluation by an estate agent. Analysing 370,000 property sales, Which? found that the likely reason for the overvaluation was the agent promising it was possible to achieve a higher price, to win the seller’s business. Those properties that had to be reduced took 64 additional days to sell, compared with the rest – a sufficient amount of time for the homeowner to lose the related property that they wanted to purchase. The analysis also revealed that sellers that had to drop their price ended up with a lower price than if they had marketed the property at the correct price in the first place. This translates to a loss of £4.3 billion for those sellers – around £20,000 per sale. Which? urged sellers to ask their agents for evidence of similar sales to back up an unrealistic valuation.
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