UK house prices still rising but could be affected by Scot vote and 2015 election

Taylor Scott International News

House prices continues to rise across the UK in August but the vote in Scotland on independence is likely to have an effect along with next year’s general election. Both could act as a dampener on growth, according to latest UK residential market update report from Knight Frank. It also points out that there are some conflicting signals emanating from the market. ‘Economic confidence is up across the country and this, coupled with more positive employment data and ultra-low interest rates is providing a sound underpinning for increasing transactions and values in many parts of the country,’ said Gráinne Gilmore, head of UK residential research at Knight Frank. She pointed out that the government’s Help to Buy scheme is also gaining momentum, with nearly 40,000 homes now purchased under the scheme. Around 85% of Help to Buy Equity Loans, the part of the scheme that allows buyers to purchase a new home even if they don’t have a 25% deposit, were taken out by first time buyers, signalling that the scheme is easing the bottleneck of pent-up demand. Yet there are some signs of headwinds in the market. ‘From a regulatory point of view, the new mortgage rules may be acting as a partial dampener on activity. While mortgage approvals for new house purchases remained steady in July after the dip seen after the MMR rules were introduced in April, they have not re-bounded to the pre-April highs,’ said Gilmore. ‘The data suggests that the rules, coupled with the new lending limits applied by the Bank of England, could be acting as a slight temporary brake on the market, especially for higher loan to income mortgages,’ she added. The report also points out that the Royal Institution of Chartered Surveyors reported that new buyer demand fell in August following a sustained period of month on month growth. ‘This could be due to the summer holidays, but it comes amid increasingly vocal hints of an interest rate rise from the Bank of England Governor. While the markets now anticipate a rate rise early next year, two members of the Bank’s rate setting committee voted for a rate rise in August, the first time this has happened since rates hit a record low,’ said Gilmore. ‘There is also a period of increasing political uncertainty looming. All eyes are on the Scottish Referendum this week. The debate over the result has already had an impact on equity markets as well as currency markets. If there is a yes vote, it is likely to be the uncertainty in the market as Scotland thrashes out its economic and fiscal policies ahead of 2016 that affect the Scottish housing market, rather than the fact that Scotland becomes independent,’ she explained. Continue reading →

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