After a gloomy RICS survey, should we be prepared for big falls in UK house prices?
Andrew Craig, an independent financial adviser and founder of Plain English Finance, says Yes.
We have already seen significant falls in house prices in the UK if, as should be the case, you measure such things in currency units other than pounds sterling. If you bought a property worth £1m around 10 years ago, that property was worth anywhere between $1.8m and $2m at the time. As I write, it is worth less than $1.3m. The value has fallen by between $500,000 and $700,000 in terms of the world’s primary reserve currency. In gold terms, your property, priced in pounds sterling, is already worth over 40 per cent less today than it was a year ago. Thinking about the price of your UK property in terms of pounds alone is like trying to measure something with an elastic ruler. To get a real picture of where UK property has come from and, more pertinently, where it might be going, you need to start thinking globally and give consideration to real (inflation-adjusted) rather than nominal levels of property prices – something far too few of our real estate professionals do.
Nina Skero, senior economist at the Centre for Economics and Business Research, says No.
The latest RICS data were gloomier than what we’ve seen recently, but they still painted a picture in line with CEBR’s house view – that the market is heading for a relatively brief rough patch, but will stabilise in the medium term. April’s second home stamp duty surcharge and the vast amount of Brexit uncertainty mean that the housing market will slow down in the second half of 2016 and in 2017, especially in London. But in the medium term, we expect house price growth to pick up again as exit negotiations with the EU progress and investors and households gain clarity on how the post-Brexit UK will look. Another factor supporting prices is that, due to years of underbuilding, availability of properties is so low that even if demand was to drop, it would still probably outstrip supply. Given that construction companies are very likely to limit their output further in light of Brexit, price pressures will also come from the supply side.