House prices have risen by 3.8% since January 2017, figures from estate agent YOPA show. This is far in excess of original predictions of 1.2%, and the figures – on the face of it at least- make for promising reading.
To put some context around this, after the Brexit vote on the 23rd June 2016 there was substantial volatility in the British economy, particularly in the currency markets, with sterling reaching historic lows against the dollar and the euro.
However, while the mood of the stock markets often reflects business sentiment, and currency makes a difference when it comes to trade, they are not always indicators of what’s going on in the general economy. For that, you need GDP, but even this often has a lag times in its reporting, and will often be for the previous quarter.
Enter house prices.
House prices are essentially an indicator of consumer confidence, as they reflect how much people have to spend and how much people are willing to spend on the most basic of human needs: shelter. From a financial point of view, a house is the biggest purchase that most people will ever make, so they need to be confident of financial stability and the ability to pay off a mortgage over the long term. Uncertainty regarding job prospects tend to have a downwards effect on house prices, so GDP growth and house prices tend to broadly correlate.
Furthermore, house price data is regularly updated, especially from sources such as Rightmove, Halifax and Nationwide.
So what is this latest property data telling us?
At the beginning of the year, industry experts were, on average, expecting house prices to rise by 1.2% over 12 months. So far this year, that figure has been exceeded and now stands at 3.8%. If this rate continues, by December, house prices will have increased by more than 7%.
So do these house prices reflect a healthy economy unaffected by Brexit?
Part of the problem with calculating the effect of Brexit on the economy is that not much has changed. Although the United Kingdom voted out, we still have the customs union, the single market and everything else that affects our day-to-day lives. In addition, the country is still subject to European law and regulations. Free movement will continue until March 2019 – or perhaps even later. As a result, nobody really knows what’s going to happen.
One thing is for sure though; many people will be keeping a close eye on house prices as we approach March 2019!
