_UK Residential Market Update: Housing Policy Push
Economic and housing market overview
Average house prices rose at an annual pace of 2% in Q3, according to the latest data from Nationwide. However, there is still a significant difference in the rate of growth across the country.
Average residential prices in London have shown a year-on-year fall for the first time in eight years, but even across this market, there are strong local differences in pricing. Data from the Land Registry, which is calculated on a different basis to the Nationwide, shows double-digit price growth in Camden and Hackney in the year to August 2017.
Overall price growth across the country has been underpinned by low mortgage rates for those who have access to equity or a deposit, but all eyes are now turning to the Bank of England as its Monetary Policy Committee gears up to decide whether to raise interest rates early next month. Swap and LIBOR rates, the money market rates that determine fixed-rate pricing, have already started to rise. However, even if there is a quarter-point rise, the base rate will still be ultra-low by historical standards and mortgage rates are likely to remain attractive compared to longterm norms.
A lack of supply of housing has also been a key factor in pricing in some parts of the market. Indeed, the delivery of housing is now at the top of the domestic political agenda. Data suggests that net additions of new homes in England rose to above 200,000 in 2016/17, a key milestone, but some way off the 250,000 Government target. The Communities Minister announced earlier this month that there would be an extra £10 billion in funding for Help to Buy, while Theresa May pledged an additional £2 billion for Affordable Housing. The November Budget may be the opportunity for the Government to announce additional policy changes to try to further boost supply.
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