What might 2020 hold for the housing market?
What might 2020 hold for the housing market?
Over the course of 2019, the British housing market has seen a range of challenges and positives. It has had to contend with a number of major political events, for example, such as Brexit and the general election – while structural economic factors have also thrown up some challenges too.
On the whole, the year up to November 2019 saw a rise of 2.1% in house prices by some metrics. There have, of course, been some downs as well as ups. In November, for example, a 1% month on month decline was reported. With this year of slightly complex housing market movements now over, it’s worth assessing what’s likely to come on the horizon in the new year.
Predictions and figures
Nobody has a crystal ball to see into the future, of course – and that’s definitely the case in the housing market, where accurate predictions could perhaps be some of the most valuable! However, this doesn’t stop keen housing market watchers from making their own predictions about what 2020 could in theory have in store for those who are buying or selling homes.
Halifax, a major financial service provider and mortgage lender, is predicting that a rise of between 1% and 3% is probable in 2020. It puts this down to a key important fact – that the required deposits are very high for borrowers who are either first time buyers or who don’t have enough equity for a big onward purchase. This is a legacy of the banking crash, after which rules about mortgage sizes, and effectively what were bans on 100% mortgages, were put into place. If deposits continue to be a problem, then, it’s likely that demand will be restricted – making the low single figure rise predicted by Halifax probable.
One of the hallmarks of the housing market in 2019 was of course the wider political context. Over the course of the year, the housing market – and the financial markets more generally – had to contend with two key events: Brexit, and the December general election. While it’s currently perhaps a little too early to properly comprehend the extent to which these did or did not affect the housing market, it’s certainly possible to infer that they caused uncertainty – and that this might have been responsible for the November decline outlined above.
But what does next year hold? One thing that is highly unlikely, perhaps, is that next year will contain a general election. Now that Boris Johnson’s Conservative Party has won a decisive majority, the chances of a further election happening are very low. Some analysts are predicting a “Boris bounce” under which there will be a significant uptick in buying of many assets – although it is a matter of opinion whether or not this will happen, rather than a guaranteed outcome. Brexit, however, is not yet off the cards. While the UK is expected to fully leave the bloc on 31 January, the key question now appears to focus on the transition deal. With Johnson claiming that Britain would be prepared to leave a transition period at the end of 2020 even without a certain set of arrangements in place, the possibility of uncertainty is still out there.
As outlined above, the British housing market is not always favourable to first time buyers due to the larger deposit requirements in place. However, there are also structural economic problems more broadly which could cause buyers to experience issues. Take the example of real household incomes: in recent years, lots of households have found that their wages are not keeping pace with the cost of living.
This can prevent first time buyers from accessing the market, but it can also prevent current homeowners from having the ability to scale up – and it can affect sale prices too. Some predictions, however, are showing that a boost in real incomes in 2020 could be one of several factors which might cause a consequent rise in prices.
While all of the above considerations are definitely important, it’s also the case that decisions about buying and selling homes should take into account your own personal circumstances as well as the wider financial markets. The possibility of the housing market crashing and causing an irreversible price drop is certainly there – but there are many reasons to make decisions based on your own life and goals.
If you are buying a property to live in for a significant period of time, it’s well worth seeing living there as an investment in yourself as well as in the property market. Accommodation is one of the major human needs and choosing to avoid a move on the basis of housing market predictions is unlikely to end well. The same applies if you choose to stay put for investment reasons even if your current property is not fit for purpose, perhaps because of an expanding family or its geographical location. So, while it’s wise to consider the wider market, it’s also a good idea to think carefully about where you stand in your own life and what your priorities are.
As this article has already explained, predicting the way the housing market will pan out with 100% accuracy is impossible. After all, if that was possible, everyone would be doing it! However, informed predictions certainly can be made – and that is what those who work as analysts or commentators are there to do. Factors as diverse as political uncertainty and structural economic conditions can be used to work out what’s to come in the year ahead – although ultimately, it’s up to you as an individual to decide what’s most important in your own particular set of circumstances.