UK house prices may be heading for a Boris bounce

Yesterday, official statistics on UK house prices suggested that the market looked as though it was bottoming out somewhat in November, even given all the uncertainty over the election and Brexit. Now, the most timely data available on the state of activity in the housing market suggests that British residential property is now benefiting from a post-election relief rally.

Every month, the trade body, the Royal Institution of Chartered Surveyors (RICS), asks its members – estate agents and surveyors – for their views on the housing market. The latest survey covers the period from 20 December to 9 January, so it’s the first glimpse of post-election activity that we’ve had. As Samuel Tombs of Pantheon Economics puts it, “the survey is unambiguously positive.” More surveyors still reported falling prices than rising ones, but the balance was far closer to even than expected. More significantly, the balance of surveyors reporting new buyer enquiries jumped to its highest level since January 2016. And more surveyors expect prices to rise over the next three months than at any point since then too.

As we pointed out earlier, this doesn’t appear to be entirely about election nerves. According to prime property data provider LonRes, sales of prime central London property rose by a third in the last quarter of 2019, compared to the same period the year before. Prices also perked up by 2.4%, having fallen for most of the year.

It’s worth remembering that the prime market is driven to a great extent by overseas buyers. Some may have felt that the chance to buy with a huge sterling discount was at risk of slipping through their fingers, and so took a punt on Jeremy Corbyn not winning the election. That said, perhaps people simply also got fed up with waiting.

What does all of this mean for 2020? Gabriella Dickens at Capital Economics is sceptical. While transactions may “rise modestly”, house prices UK-wide remain “very high.” With mortgage interest rates very “close to their floor”, there isn’t a lot of room for rates to drop further, which is probably the key to what happens next for prices.

As we wrote yesterday, ideally we’d rather see house prices continue to lag behind rising wages. However, if the Bank of England genuinely does see scope to cut interest rates from here – as some are arguing – then there’s a risk that we won’t get our wish.