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16 April 2024

UK's May election puts property market in wait-and-watch mode

House prices rose at their slowest annual pace in January since May 2013 and fell for a fifth month in London. (File) (Shutterstock)

By Staff

Average house prices in the United Kingdom will rise 3.5 per cent in 2015 with cumulative growth in prices totaling 18.2 per cent in the five years to the end of 2019, according to Knight Frank.

‘‘Looking ahead to 2015, the UK’s General Election obviously has the potential to influence the direction of the housing markets significantly, especially the central London market.

We stated last year that positive price growth was set to become a national story, with the ripple from London a well-established trend. We noted at the time that there was a flip-side to this development. Strengthening price growth in the short term would act to limit longer term growth,” said Henry Faun, Knight Frank Surveyor: International Residential.

“We remain of the view that pricing in the UK is high in historic terms and affordability constraints will limit future price growth, especially as we move into a more normal period for price growth. However, with the UK economic recovery continuing to gain traction and with positive real wage growth increasingly likely over the next five years we believe there is scope for sustained price and rental growth beyond 2015.”

The Royal Institution of Chartered Surveyors (Rics), however, said that house prices rose at their slowest annual pace in January since May 2013 and fell for a fifth month in London, according to an industry survey that suggested political uncertainty ahead of a national election is crimping demand.

The monthly house price balance sank to +7 in January from +12 in December, below all forecasts in a Reuters poll of economists.

The index measures the assessment of surveyors of whether house prices have risen or fallen on an annual basis over the previous three months.

Britain's housing market has been slowing since mid-2014, when regulators required banks to make closer checks on whether borrowers would still be able to afford mortgage repayments if interest rate rise sharply.

The survey showed house prices fell in London for a fifth consecutive month, with its price balance for the capital falling to a six-year low.
Rics said a national election on May 7 was also causing both buyers and sellers to pause for thought.

Opinion polls show the election race is too tight to call.

The opposition Labour Party has said it would introduce a tax on properties worth more than two million pounds. Some investors are worried about the ruling Conservative Party's pledge to hold a referendum on Britain's European Union membership.

“Anecdotal evidence from respondents suggests that a multitude of factors are impacting different markets, with political uncertainty weighing to some extent on all parts of the UK,” Rics said.

The survey also suggested slow progress would be made in bringing new houses to the market.

"(The) volume of home starts will still fall considerably short of the number of new households being formed, let alone making a dent in the historic shortfall of housing across all tenures," said Simon Rubinsohn, chief economist at Rics.

British house prices jumped unexpectedly last month, recording their biggest rise since May 2014, according to mortgage lender Halifax. But it said it expected the overall pace of house price rises to slow this year.