With everything which has been happening in the UK recently, it’s hardly a surprise that the housing market as a whole has taken something of a battering. It’s also hardly a surprise that some people are getting nervous about the prospect of house prices entering a downward spiral, or even crashing. While we acknowledge the overall slowdown, we think that rumours of a crash are greatly exaggerated.
Halifax and Nationwide both record price drops in April
According to Halifax, prices dropped 0.1% and according to Nationwide, they dropped 0.4%. While these drops are slight, they could be enough to spook some property investors, particularly since they are simply the latest indicators that house prices have been shifting downwards since December 2016.
On the other hand, however, most markets show some degree of volatility, it’s just that for various reasons, the UK housing market tends to show a whole lot less volatility than most. Hence the key question is whether investors currently need to worry about the UK property market being in serious trouble, or whether they just need to accept the fact that even the hottest markets come off the boil sometimes. The answer to this question, in our opinion, can be found in the age-old and utterly-reliable law of supply and demand.
The UK has a chronic under-supply of housing
This is one, long-standing, fundamental truth of the UK housing market and there’s very little sign of it changing overnight, or at any point in the near future. What this means in very basic terms is that people still need to be housed, therefore the only meaningful question is whether or not they can afford to buy their own home or whether their circumstances mean that they are better suited to renting. The answer to this question will depend on various factors, one of the most important being the geographical location in which they want, or need, to live.
London versus everywhere else
After the Brexit vote, there was a variety of comments online about the possibility of London becoming a kind of “free city” within the UK and securing its own deal with the EU. There are all kinds of reasons why that would be highly likely to work in practice, but it does highlight the fact that in many ways London and the Thames Valley area operate to their own set of rules.
In particular, their housing market is very different to the markets in other parts of the country, including the north of England. In particular, prices there tend to be substantially higher than anywhere else in the UK. Because of this any slowdown in the M25 corridor can be more than enough to register as a negative trend on national indices, without actually having much of a practical impact on other local UK markets.
The south slows while the north presses ahead
For many years, the North of England was the place people left to move down south for better opportunities. Over recent years, however, there has been an increasing flow of people moving from south to north for exactly the same reason.
London’s strength as a global economic centre is unlikely to disappear at any time, let alone any time soon, but the growing strength of the north of England suggests that it is very likely that the UK economy will go through a period of rebalancing and becoming less “London-centric”. This has obvious and clear implications for the housing market, suggesting that, for the immediate future, the best prospects for investors are in the north of England rather than the south.
Hopwood House are specialists in property investment, with a large portfolio of investment opportunities throughout the UK, including property investments in Liverpool, Manchester and London.