Residential property prices across many parts of the UK look set to cool over the next few months amid ‘Brexit’ uncertainty, but two regions have been identified as offering major room for growth over the next few months, according to a new survey.
A fresh poll conducted by the Royal Institution of Chartered Surveyors (RICS) suggests that the forthcoming referendum on European Union membership and elections in Scotland, Wales and Northern Ireland will lead to a slowdown in the overall UK housing market, led by the housing market in London.
“Elections inevitably bring with them periods of uncertainty in the market, and our figures would suggest that next May’s devolved elections are no exception,” said Simon Rubinsohn, chief economist at RICS.
“Likewise, the EU referendum is likely to be an influencer in terms of the damper outlook for London in particular,” he added.
The recently introduced 3% stamp duty surcharge on second homes and buy-to-let investments were an additional factor contributing to the slowdown.
However, the North West of England and Northern Ireland look set to buck the falling house price trend, with experts forecasting that these areas will offer the greatest room for growth over the spring and early summer periods.
North West of England
In contrast to the turbo-charged property markets in London and the South East, capital growth in the North West of England has been more subdued since prices bottomed out in 2009, with a modest rise in property values recorded in recent years.
Like most places, there are regional variations across the North West of the country, with the market in Manchester widely expected to record the greatest level of growth in the medium to long-term, supported by a strengthening economy, fuelled in part by plans to create a Northern Powerhouse.
“As the largest area of economic intensity in the UK outside London and the South East, Greater Manchester is seeing strong business growth and an economy expanding at twice the national average, and that success is feeding into house prices in the most desirable boroughs in the area,” said Christian Spence at Greater Manchester Chamber of Commerce.
“These price increases are good news in terms of signalling the increasing desirability of our city-region, but they also signal a constriction in supply,” he added. “We must move quickly to support greater investment in new housing suitable for our growing population.”
Last year, Manchester was named in a survey, conducted by HouseSimple, as the number one place in the UK to invest in property, with property prices in the city more likely to ‘boom in the next 10 years’ than anywhere else in the country, thanks partly to a rapidly growing population.
“Manchester is a modern, thriving city and the Northern Powerhouse initiative has focussed a lot of attention on it. It is already a great city in terms of transport links and the modern railway revolution that is currently taking place there is going to be a game-changer in terms of improving access,” said Jonathan Stephens, managing director of Surrenden Invest.
The housing market in Northern Ireland is showing little sign of uncertainty from the EU referendum and recent stamp duty changes, with surveyors also expecting to see a hike in sales in the coming three months based on a strong performance during the first quarter of this year.
A severe shortage of properties in the market is placing upward pressure of home prices in Northern Ireland, in addition to the fact that Northern Ireland’s housing market remains in recovery mode, with prices and sales still significantly below their peak.
“The changes in stamp duty, in addition to the upcoming EU referendum and the forthcoming Assembly election, are combining to create uncertainty in the economy,” said RICS
Northern Ireland residential property spokesman Samuel Dickey. “However, there is little sign of this impacting on the Northern Ireland housing market at this stage in terms of expectations for prices and sales.”
The latest survey suggests that just over 46% of surveyors expect prices in Northern Ireland to continue increasing between April and June, with 37% of surveyors expecting sales activity to rise over the same period.
RICS said it expected residential property prices in Northern Ireland to increase by about 5% over 2016.
Sean Murphy of Ulster Bank said that surveyors were positive about expectations for both house prices and sales activity.
“March brought the first quarter of 2016 to a close and the latest survey suggests that it was a relatively strong start to the year in terms of prices,” he said. “Mortgage activity at Ulster Bank remains strong and we expect to continue that in the months ahead.”
In the longer term, RICS forecast that house prices will rise by just over 4% annually in England and Wales – regardless of the results of the EU referendum and the elections.
“The imbalance between demand and supply will still exert a strong influence on the market, with house prices expected to rise by close to 25% over the next five years,” said Simon Rubinsohn.