SUMMARY

House prices rose by 0.3% in February, according to Nationwide. While smaller than the 0.5% rise seen in January, on an annual basis prices were up 2.3%, the strongest for 18 months. It was also the fifth consecutive month of house price growth, the first time this has happened since early 2016. And more surveyors reported price growth in January than at any time since June 2017, with 59% seeing price rises, according to the RICS Survey. This strong start was anticipated by our forecasts, but we expect uncertainty over Brexit trade negotiations to reduce momentum later in the year.

Confidence in price growth was matched by surveyors’ reports of activity. New buyer enquiries and new instructions increased for the second month running in January, according to a large majority of surveyors. This appears to be filtering through to transaction levels. HMRC reported the strongest January for transaction levels since 2017, with the seasonally adjusted figure up 5% on the previous year. It will take time to compensate for steady falls in activity we’ve seen over the past three years, but the rising levels of enquiries and instructions indicate this uptick in activity is likely to continue.

This positive outlook is tempered by increased risks to the wider economy. Alongside Brexit’s return to the headlines, as trade negotiations begin, the spread of coronavirus COVID-19 may have a substantial impact on the global economy. The economic consultancy Oxford Economics has suggested it may nudge down its UK GDP forecasts in early March as a result. At the same time, Governments and Central Banks are committing to support markets through the uncertainty.

The top three performers of 2019 were all in Scotland: Angus, Argyll & Bute, and South Lanarkshire, where annual house price growth was 10.1%, 8.0% and 7.8% respectively. Scotland also contained the weakest performer of 2019, Aberdeen, where prices fell -5.0%. South Bucks and Watford were the next weakest, both with annual price falls of -3.4%.

National rental growth was the highest it’s been since October 2017 at 1.5% over the year to January 2020. Growth was strongest in the South West, where it grew by 2.3%, followed by the East Midlands at 2.2%, and weakest in the North East and in Scotland, both at 0.6%. The RICS survey has continued to show a widening gap between demand from tenants and landlord instructions. This gap will continue to support rental growth.