It is a complicated story for the housing market in the first quarter of 2018 with marked regional variations and continuing uncertainty as the country waits for the outcomes of the Brexit negotiations. The UK economy continues to grow, albeit slowly, but despite declining inflation levels and wages finally starting to rise, consumer confidence remains in negative territory.
The higher than expected rise in consumer confidence recorded by the GFK NOP consumer sentiment index in March proved to be short-lived and it dropped again in April. UK consumer confidence has now remained negative for the past 28 consecutive months dropping from -7 last month to -9 in April 2018.
However broader indicators for the economy are showing signs of strengthening. Inflation has dropped to its lowest rate for the past year and employment levels in the UK have reached record breaking highs, with just over three quarters (75.4 per cent) of people aged between 16 and 64 years in work. Correspondingly, the unemployment rate is at an all-time low. There are also signs that salaries are finally starting to increase. Taking into account inflation, average wages in Great Britain grew by 0.2 per cent between December 2016 to February 2017 and December 2017 to February 2018.
Pessimism in consumer markets tends to undermine confidence in the housing market and, although national house prices have continued to grow since the start of the year, the pace has slowed. In the 3 months to March, UK house prices were 2.7 per cent higher than a year earlier but with marked variations between different parts of the country. London remains the most expensive region with average prices of £473,766 but this is 1 per cent lower than the same time last year. In the rest of the UK, house prices have increased with Northern Ireland, the North of England, Wales and Yorkshire and Humberside seeing growth rates accelerating between the first 3 months of 2018 and the last three months of 2017.
Demand has been disappointing with a lack of both new buyer enquiries and new instructions according to the RICS Residential Market Survey. In London, there was also a rise in the number of properties withdrawn from sale compared with a year ago. Looking ahead, sales expectations in the UK remain marginally positive for the next three months with the exception of London and the West Midlands where agents are more pessimistic and expect a fall in sales levels. The survey respondents become more positive about the 12-month horizon but once again there are marked variations between the regions.