Property outlook for 2018 – are prices headed up or down?

12 December 2017

Are you considering whether to step on to the property ladder in 2018, move up the ladder or invest in the market? Well, it seems that the year ahead will be just as challenging as 2017, whether it is post-Brexit uncertainty or political pressure to tax wealthy homeowners.

Here, Moneywise asks property experts for their 2018 predictions, and it seems they are broadly in agreement – except when it comes to London house prices.

Mixed views on London

Russell Quirk, chief executive of online estate agent eMoov, is broadly optimistic about the market in 2018: “UK house prices are up 5% since last December and we predict that they will continue to increase at a similar rate in 2018 as the market has already begun to find its feet again.

“In London, prices are up just 3% and while some boroughs have continued to enjoy very healthy price growth, there are large pockets that have seen property values decline rather drastically. That said, I think buyers are starting to capitalise on this and price growth will remain muted, but grow around 5%”. 

James Greenwood of property finders Stacks Property Search agrees: “Prices in London will stabilise – some [properties] having shown a drop of 20% to 30%. This will present London buyers with one of the best opportunities for a decade, but be forensic on price.

“Normally a 20% to 30% drop would cause a crash, but the fact that prices are beginning to recover shows just how much fat there was in the market. 2018 won’t be the land of milk and honey, but the capital is definitely back on its feet.”

In contrast, buying agent Henry Pryor believes that London prices are heading downwards, saying: “I expect house prices in London to fall next year by 5% and to remain flat across the UK. Until home movers work out that their home is worth less than it was – but that if they are buying another this doesn’t really matter – then the market will be sticky. It’s the gap between what they sell for and what they have to pay that impacts on most people.” 

First-time buyers’ stamp duty break ‘will put pressure on prices’

When it comes to the tax break on stamp duty for first-time buyers, announced in November’s Budget, Mr Pryor is doubtful that it will galvanise the market.

He says: “The government’s changes to stamp duty will lose its gloss by March, with some sellers already trying to price the benefit into their asking price. While it may tempt some into considering a purchase, the unaffordability of property will continue to shut them out of homeownership.”

David Hollingworth, associate director of communications at broker L&C Mortgages disagrees: “Although I’m not sure that stamp duty would necessarily be the difference between someone buying or not, I do think that the first-time buyer relief could accelerate the decision to buy or help improve the available deposit. 

“It’s a substantial sum that can be wiped from the required savings pot that hard-pressed first-time buyers have to build. However, as welcome as it will be, the affordability issues will ultimately be helped in the longer term through structural changes to increase supply.”

However, Douglas Cochrane, head of housing development at Lloyds Banking Group, sounds a word of caution: “I’ve talked a lot to would-be buyers who have said that this will bring their aspiration of homeownership forward as their deposit will now go further. We can’t forget, however, the Office for Budget Responsibility’s comment that, in the medium term, anything that stimulates demand without a corresponding increase in supply will put upward pressure on prices.”

Buy to let ‘still lucrative’

While the buy-to-let market has faced tougher taxes and mortgage affordability criteria over the last year, the consensus is that most landlords will stick with their property portfolios.

Mr Hollingworth says: “Buy-to-let landlords have had plenty to deal with in the past year or two.  The stamp duty surcharge on additional property, changes to tax relief and tighter lending criteria for individual and portfolio landlords could not fail to make an impact.

“Some may decide that as the changes continue to feed through that it will alter their approach to buy to let. However, that may manifest itself as smaller landlords not adding additional properties, rather than exiting the market altogether. There will certainly be a place for buy to let, and existing landlords are likely to continue to manage their mortgage costs closely and take advantage of some of the competitive fixed rates on offer.”

Mr Quirk agrees: “The buy-to-let market remains a very lucrative one. While we may see some decline in numbers, I don’t believe they will vanish from the sector.”

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