SUMMARY

2020 kicked off with strong house price growth, up 1.8% in the year to January, according to Nationwide. This was the highest annual price growth since November 2018. This positivity was trailed by surveyors, who reported significant increases in activity, according to the RICS survey for December. Reports of both new instructions and new buyer enquiries were at their highest since before the Brexit referendum in April 2016. Further evidence of a strong December comes from the mortgage market, with new mortgage approvals surging to their highest levels since April 2015. Early transaction figures from HMRC show a bump in activity for the month, with transactions up 11% on the previous year and broadly back in line with December numbers since 2013.

As certainty begins to replace uncertainty, the market looks primed for a release of pent up demand. This demand will be supported by an increasingly competitive mortgage market. Rates have continued to slide downwards, with the 3, 5 and 10 year fixed rate mortgages now at record lows. Rates seem set to stay where there are for the time being, with the MPC rejecting a cut to the base rate by 7:2 last week. Many commentators still anticipate a cut, but Oxford Economics consider this to be unlikely, citing strong business survey indicators that predict a boost in consuming spending. All of this bodes well for house price growth.

While many of the key elements are in place for a return to confidence in the housing market, much will depend on how well the Brexit negotiations proceed over the next year. Our forecasts from November last year assumed that the transition period would end with a free trade agreement in December 2020. However, throughout the year the housing market is likely to remain highly sensitive to perceptions of how trade negotiations with the EU are proceeding.

The strongest annual house price growth during the year to Nov-19 was in Angus, up 9.9% annually, followed by Wolverhampton at 9.0%, and east Ayrshire at 8.3%. The weakest performers were Aberdeen City, South Bucks and Watford, which all saw annual falls of about 4.0%.

Annual rental growth across the UK held steady at 1.4% in December. The growth was strongest in the South West and East Midlands, both at just over 2.0% annually. Growth was weakest in the North East and Scotland, only up about 0.5% annually.