Slow moving Brexit talks maintain uncertainty in the market
House price growth has fallen back into negative territory after two consecutive positive months, according to the Nationwide index which reported month on month falls of -0.1% in August. Year to date growth reached 1.1% in August and looks set to reach at least 1.5% by year end, slightly higher than our forecast for 2017 of 0%
(published in November 2016).
This low level of growth is reflected in the July RICS survey, which reported a further drop in surveyors’ confidence in house price growth following a significant fall in June. The same number of surveyors are now reporting price falls as price rises. Fewer surveyors reported falls in new enquiries and instructions in July, although the majority still think market activity is lessening. The measures for enquiries and instructions continue to move in line with one another, so there remains limited pressure on prices to move either up or down.
The uncertainty among surveyors is part of a wider economic apprehension. GDP growth in Q2 was unrevised with the release of more detailed data; high government consumption drove growth whilst low consumer spending acted as a drag. Consumer appetite for further borrowing and larger purchases is waning as annual growth in consumer credit has fallen to a twelve month low. This weaker consumer sentiment is not good news for house prices or the wider economy. Neither is the lack of clarity on Brexit, which has led Oxford Economics to narrow the probability gap between their two most likely 2019 outcomes: a transitional arrangement followed by an free trade agreement, or a move straight to the final UK-EU relationship with WTO tariffs, heightening the risk profile.