Financial Planning

Are House Prices About to Pick up Again?

Are House Prices About to Pick up Again?

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Predicting property prices is at least as difficult as trying to predict the stock markets. The most experienced market commentators might get it right once, but delivering this accuracy on a consistent basis is near-impossible. It certainly hasn’t stopped many estate agents and economists from trying, however. Savills predicts that house prices in England’s north-west will climb over the next five years, possibly six faster than in London.

The main danger with predicting the property market is similar to that posed by the volatility of the stock exchanges; it tempts people to try and “time the market”. People ask: “should I sell my house now, in case a no-deal Brexit transpires in 2020 and leads to a fall in prices?” For buyers sitting on the other side, many ask: “Should I postpone my decision to buy a house until next year, when I might be more likely to get a better deal?”

The fact is, all markets (including property markets) are affected by countless forces bouncing off each other, at every moment throughout every day. It is impossible to identify them all, or to monitor them accurately even if we could. Add on top of that the human factor, where decisions are not always made rationally or predictably, then you quickly start to see how foolish it is to try and predict the property markets.


The place of opinion in predictions

With all this said, it is still important to listen to experts about different possible scenarios for the property markets in 2020, and their likelihood. Almost certainly, the 12th December UK general election and Britain’s possible exit from the EU at the end of next January will have an impact. It’s also important to remember that opinions are subjective, and even the majority view can be wrong at times.

A good example is the recent survey by Good Move, who found that around 75% of British people have overestimated the impact of Brexit on UK house prices. A similar figure believed that house prices in their area had risen less than they actually had since June 2016, whilst 32% thought that property values in their area had declined. In reality, property prices have risen in almost every major UK city since the referendum three years ago, albeit at a slower pace.


Will the December election affect house prices?

This is a difficult one to call, not least because this coming election is set to be held at an unusual time of year. Over several decades, UK general elections have typically been held during the warmer months of the year (e.g. May). December is also usually a quieter period for the property market, as people start winding down for the holidays and new year. Historically, higher buying and selling activity tends to occur in the Autumn and Spring months.

With that said, the policies of any winning party after the election could influence property market activity. Looking at the manifestos, the Conservatives appear unlikely to introduce any major policies which disrupt the current approach. A Labour government could stir a lot more activity, possibly through reform of property taxes and controls to house price growth.


What about Brexit?

One important thing to note about UK house prices is that they are probably affected by political uncertainty over Brexit. However, this is not as significant as interest rates for mortgages, or the ratio of wages to house prices.

If house prices are very high in comparison to people’s salaries (as they are now in 2019), then in a sense it makes little difference whether or not Britain leaves the EU with or without a trade deal in 2020. If people cannot afford the required deposits or monthly mortgage payments due to a high interest rate, then people cannot move even if they want to.

A Brexit trade deal might bring more stability and growth to the economy than a “no-deal” scenario in 2020. Of course, this could also have an impact on the employment rate and wage growth, which in turn can affect the housing market. All of this, however, is very hard to predict.


What will happen to the Base Rate?

Lenders’ mortgage products are heavily tied to the Bank of England base rate. If the latter goes up, then banks will typically follow it by raising their interest rates (which might be set 3-5% above the base rate). One area of speculation for 2020 concerns whether this will, in fact, occur. Some experts are anticipating a further potential cut in the BoE base rate in 2020, in an attempt to stimulate the economy in the light of Brexit. Currently, rates are being held at 0.75% but there is talk that rates could be lowered to 0.5% in 2020. It is uncertain, however, whether this will occur and when.


Final Thoughts

We conclude in a similar way to how we began. No-one can confidently predict what will happen to property markets across the UK in the wake of the 12th December 2019 election, following a potential Brexit in January 2020 and into the following months. The important thing to remember is to think very carefully if you are tempted to try and time the market. Speak to your financial adviser if you have any concerns or questions about how your mortgage or property assets might affect your financial plan in the coming year, to ensure you have the best possible information before making any big decisions.

If you would like to discuss your financial plan or mortgage with a member of our team, then get in touch today to arrange a free consultation: 020 8366 4400 or


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