Home Property Rightmove predicts a 2 per cent house price rise in 2020

Rightmove predicts a 2 per cent house price rise in 2020

by LLP Editor
28th Dec 19 4:11 pm

We might not be out of the storm just yet, but a newly elected majority government has certainly calmed the waters a little and given UK home-movers a window of certainty for an active spring moving season and a more favourable forecast for next year’s house prices.

The latest data and analysis from Rightmove has revealed that the monthly decrease (-0.9%) is the smallest at this time of year since December 2006, showing that sellers and their agents think that demand is strong.

Demand outstripping supply: number of sales agreed so far in 2019 down by just 3% on 2018, while number of properties coming to market down by 8%. Fundamentals remain sound with low interest rates, lenders competing to lend, high employment, and wage growth helping buyer affordability.

2020 forecast

Rightmove predicts that the price of property coming to market in Britain will rise by 2% in 2020. Home-mover confidence and activity have been dogged by political uncertainty since the 2016 referendum. With a clear majority in the election, there is now an opportunity to release some of the pent-up demand in the spring, and for some modest upwards price movement. Sellers’ pricing power will be enhanced by a lack of choice for potential buyers, with the proportion of estate agent stock that is available for purchase at its lowest for over two years.

Miles Shipside, Rightmove director and housing market analyst said, “The greater certainty afforded by a majority government gives an opportunity for a more active spring moving season, with some release of several years of pent-up demand.

Given the Brexit track record to date, further political twists and turns should not be ruled out, though with a large majority there is a higher possibility of an end to the series of Brexit deadlines, and the prospect of an orderly resolution. Rightmove measures the prices of 95% of property coming to market, and we predict that buyers and sellers will on average see a 2% rise in those prices by the end of 2020.

While this is over twice the current annual rate of 0.8%, it’s still a relatively marginal increase as it’s a price-sensitive market. There will be regional variations. London is finally showing tentative signs of bottoming out, and we expect a more modest price rise of +1% in all of the southern regions where buyer affordability remains most stretched. In contrast, the largest increases will be in the more northerly regions, repeating the pattern of 2019 with increases in the range of 2% to 4%.”

2020 demand and supply indicators

Demand has shown remarkable resilience in the face of the uncertain outlook and various disruptive Brexit deadlines since the 2016 referendum. One year ago we forecast that there would on average be no upwards price movement, with 2019 seeing a subdued 0% price change given the uncertain outlook and stretched buyer affordability. 2019’s annual rise stands marginally above our forecast at 0.8%, with a stronger than anticipated end to the year. This month’s 0.9% fall is the smallest at this time of year since December 2006.

Prices are being under-pinned and pushed upwards by demand outstripping supply. Demand from buyers has remained almost level, with the number of sales agreed so far in 2019 down by just 3% on 2018 despite the political uncertainty. In contrast, the number of properties coming to market is down by 8%.

Shipside said, “With much of the political uncertainty removed, we expect that the number of properties for sale will recover as more new sellers come to market, making up some of this year’s lost ground. However, property supply is still limited, with estate agents having the lowest proportion of properties available for sale in two years, and this will fuel modest gains in the national average asking price of property coming to market.

The fundamentals remain sound with low interest rates, lenders competing to lend, high employment, and average wage growth outstripping house price growth and helping buyer affordability. The statistics for 2019 encouragingly show that the ‘have-to’ and ‘life-stage’ markets have been carrying on, and we hope that the more certain outlook would encourage many would-be discretionary movers to finally get off the fence.”

But 2020’s housing market will still fall short of capacity, and the factors to allow it to return to full health will only be in place when Brexit is well in the past. The final deal with the EU and trade deals with many other countries are still to be negotiated, and Brexit will continue to dominate the political agenda. In addition, the main driver of a healthy sustainable market is steadily improving affordability and while this is moving slightly in the right direction, more needs to be done to help aspiring first-time buyers.

Shipside concluded, “First-time buyers are the drivers of the market. Too many are struggling to save the necessary deposits, and not all of them want to buy a new-build home through Help To Buy. More ways of getting more people onto the ladder would help to limit rising rents, increase liquidity and transaction numbers in the housing market, and make the dreams of their own roofs above their heads a reality for many more of the younger generation.”

Josef Wasinski, co-founder of Wayhome said, “Aspiring homeowners will be waiting to see how their route to homeownership might be impacted by the new government. A whole host of political issues and challenges face the Prime Minister and high on the agenda should be the homeownership crisis – which is a chronic problem.”

The reality for many is that buying a home is only possible with the help of friends and family. Thousands of reluctant renters will continue to be ignored without radical change from the Conservative party and we welcome any efforts to address this long-standing issue.”

Tomer Aboody, director of property lender MT Finance said, “This report reflects a time when there was uncertainty as to which party would be elected and the outcome of Brexit. Nervousness has stoped people buying property or proceeding with sales. But following Thursday’s general election result, over the next 12 to 18 months we should see positivity filter back into the market. We expect an increase in property values across the country, London more so than others, as this is the city where the highs and lows are usually the greatest.

People should seek comfort from the fact that we have a business-focussed government, which in turn gives confidence to the housing market. 2020 should see steady growth for the market for the first time in five or six years.’

Jeremy Leaf, north London estate agent and a former RICS residential chairman said, “The strength of any post-election ‘bounce’ will largely be determined by early clarification of the Brexit timetable.

“Demand cannot remain pent-up indefinitely. So perhaps we should not be so surprised at the determination of some buyers to take advantage of improving affordability to negotiate hard, irrespective of seasonal and political distractions. That sentiment is reflected in a greater-than-usual interest in pre-Christmas market appraisals.

“As a result, we expect some vendors to list sooner rather than later to take advantage of the usual Boxing Day ‘spike’ in online viewings. On the other hand, many are waiting until the first or second week of the new year when children would have returned to school so properties will be more suitable for viewing and likely to generate greater interest.

“It would be surprising if there is a significant increase in values over the next few months. Prices have been underpinned for some time by a shortage of supply, so any rise is likely to be more than outweighed by the usual increase in stock covering most price ranges at this time of year.”

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