A report by the Office for National Statistics (ONS) shows that the average home in the UK is now worth £218,000 as at the end of November 2016. While we await figures for December, expected to show a further rise, the year to November performance saw an increase of 6.7% on the value of the average UK home. So, with the average UK home now worth £218,000 what does this mean for the UK property market?
Official statistics
While the average UK home is now worth £218,000 it is worth noting that the average property across England and Wales is worth a staggering £234,278. This is a 7.2% increase year on year to the end of November and indicates the strength of the English and the Welsh markets. The performance of UK property peaked at 9.3% just prior to the Brexit vote in June and the figure for November, at 6.7%, was a slight increase on the 6.4% in October.
As you might have guessed, the performance of London property was head and shoulders above the rest of the UK showing an increase of 8.1% year-on-year and an average price of £481,648. As we have said on numerous occasions, the London property market is in effect separate from the rest of the UK.
Doom and gloom merchants
Ever since the surprise vote in favour of Brexit, the doom and gloom merchants have been hovering over the UK property market predicting a collapse. While the markets did take a breather in the aftermath of the Brexit vote, prices have been strengthening towards the end of 2016. It would be foolish to suggest that there are not choppy waters ahead, as we approach Brexit negotiations, although this talk of doom and gloom seems to have been overdone. If markets have performed so admirably in light of the negative headlines across the mass media, how might they have performed if headlines had been a little more positive?
At some point the UK real estate market will be hit as we hear rumours and counter rumours of a potential trade deal with the European Union. This will be the time that the critics of Brexit emerge yet again to pat themselves on the back and say they were right all along. However, there is a very strong backbone to the UK property market which has been impacted by an array of different factors.
Supply and demand
If you look at the supply and demand figures you will see a significant drop in property transaction completions over the last couple of years. In normal market conditions this could lead to a softening of prices but it is more a lack of supply which has impacted the completion figures than falling demand. Indeed there are signs that demand for UK property is starting to pick up again especially when you bear in mind that traditionally the winter months are extremely quiet.
It is also worth taking into account the extremely low interest rates available on mortgages and it would be foolish to ignore their impact. In many areas of the UK it is now possible to acquire property with rental yields well in excess of mortgage rates giving a net return after finance costs – as well as potential capital gains going forward.