What will house prices do in 2018?

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Martin Bikhit, Managing Director of Kay & Co rounds-up 10 house price predictions for 2018.
Predicting future trends in the housing market is both an art and a science. If we could all do it, we would all be living in a town house in Marylebone or Mayfair. Yet the crystal ball for 2018 is murkier than usual because of the Brexit negotiations. The clock is ticking, and by this time next year, the likely contours of post-Brexit Britain should be much clearer. But already there are a few general pointers and predictions for the housing market in 2018.

1. The marginal rise in interest rates may have put a slight dampener on the market, but the increase in monthly mortgage payments will probably be too small to dent confidence in the year ahead.

2. Even in a challenging year, the UK property market has remained resilient. UK house prices are up 1.6 per cent on a year ago, according to Rightmove figures.

3. Mainstream forecasts by expert analysts are for a small rise in house prices in 2018. Price Waterhouse Coopers believes that house prices will rise by around 4 per cent in 2018, while an even more cautious forecast by Oxford Economics predicts growth of 1 per cent a year for the next three years.

4. Many agents are far more bullish than a year ago, when confidence was at a low ebb. In an RICS survey this autumn, a net balance of +28 per cent expect house prices to rise in the next twelve months.

5. The continuing challenge of under-supply in the market should buttress prices and reduce any risk of ‘a sustained downturn’, according to bankers Morgan Stanley.

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6. The prime central London market, where prices fell by 3.2 per cent in the first nine months of 2017, could be about to come out of the doldrums. In a LonRes survey last autumn, 46 per cent of respondents were pessimistic, expecting prices in central London to fall by more than 5 per cent in the next twelve months. Only 14 per cent are equally pessimistic this autumn, say LonRes.

7. KPMG is predicting ‘a gradual rebound in the medium term’, with boroughs such as Westminster achieving price rises of over 4 per cent over the period 2017-20.

8. There have been some reassuring signs of resilience in the economy as a whole. With modest year-on-year growth and unemployment falling to a 40-year low, mortgage approvals have also been on the rise, reports the Halifax.

9. The political uncertainty in Spain, arising from the crisis in Catalonia, could deter some overseas investors who had been starting to see the country as a safer bet than the UK, post-Brexit. But equally we have had a spike of enquiries from potential Spanish tenants exploring the possibility of moving to London due to the political uncertainty.

10. In London as a whole, despite the impact of stamp duty, the picture is still positive. Kay & Co experienced an uplift of interest from buyers over the past few months with an increasing number of investors looking to buy across Marylebone and Hyde Park. We predict this will continue in 2018.

No doubt the Chancellor of the Exchequer has already been giving thought to the state of the property market when preparing his Budget, to be delivered later this month. Selected cuts in stamp duty, as many are urging, could give a boost to both the buy-to-let sector and the property market as a whole.

The good news is that there seems to be a consensus that the UK property market is pretty robust, and that bricks and mortar still remain a sound investment in the capital.

• Martin Bikhit, Managing Director of Kay & Co has more than 20 years’ experience in the prime and super-prime property sectors. Contact Kay & Co estate agents for details of properties for sale or to rent in Marylebone, Bayswater, Paddington, Notting Hill, Mayfair, Fitzrovia, Regents Park and The West End (020 7262 2030; Kay & Co).

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