Author Mark Fairlie

Is the recent boom in house prices coming to an end? Leading estate agent, Countrywide, has predicted that prices will rise 1.5% in 2017, a marked slowdown from 2016’s 5% increase.

For many Britons, the value of their homes (and other property they purchase with the intention of letting out) is their major store of value for their future.

In the last 20 years, since the buy-to-let boom started, house prices have increased 259% across the country. Many people look to property not only to provide them with a roof over their heads, it’s their major pension investment and it’s a way of creating additional income (either through house price inflation or from rental income).

Should homeowners be worried? Let’s look at what the opinions are on the housing market from those in the industry.

Economic uncertainty over Brexit

Following the 2016 referendum, the UK will leave the European Union at the end of March in 2019.

Many economists are worried about the nature of the deal the UK agrees with the European Union, with specific concerns that it will make importing and exporting more expensive and time-consuming. This could be detrimental to UK manufacturing employment too.

The UK also sells a significant amount of financial services to other European countries. There is currently no way of knowing how much of this trade will be affected post-Brexit as the negotiations are at a very early stage.

Despite the fact that internal investment (decisions made by companies overseas to open facilities in the UK) is higher for the year after the referendum than the year before, analysts are worried that even more investments are either being delayed or cancelled due to the uncertainty.

When homebuyers are not clear about their employment and money prospects for the years ahead, they are less likely to want to move to a bigger house with bigger mortgage payments.


As mentioned earlier in the article, house prices have increased 259% since 1997. During that time, wage growth has been much lower at 68%, according to the Office of National Statistics.

That means, whereas the average house in 1997 cost 3.6 times annual earnings, that cost is now 7.6 times. Monthly mortgage repayments are much higher and the average first-time buyer now has to find £33,000 for a deposit.

The average age of a first-time buyer is now 30 years old compared with 24 in 1997, indicating that many more years of savings are needed for someone to get their first foot on the property ladder.

Even if house price inflation slows down, the ability to buy a first home is increasingly out of reach for many, meaning a significant part of the demand for home purchasing in the future will never exist. This could be storing trouble for house prices ten or twenty years in the future.

Foreign investors

House Prices inflation

Following the referendum, the pound dropped in value by around 10% and has stayed at roughly that level since.

The effect of the pound dropping means that it’s cheaper for overseas buyers to purchase UK property.

Research from Savills, quoted in the Daily Telegraph, indicates that Middle and Far Eastern buyers have spent nearly £1.9bn on property outside London in 2016. “We’re seeing the first signs of foreign buyers looking at markets such as Bracknell and Portsmouth that provide more yield compared to the traditional hubs of Birmingham and Manchester,” explained Richard Merryweather of Savills.

However, this demand from foreign investors is not replacing the demand that has been dropping off from UK buyers because of affordability issues.

Foreign investors tend to buy city centre residential and office developments before they’re built (so-called “off-plan”). Native investors are much less likely to bid for off-plan homes, instead opting for existing homes and apartments.

Number of existing homes for sale

Economic uncertainty means that not only are people less likely to want to buy homes, they’re also not wanting to sell them either. The average number of properties on an estate agents’ books is at its lowest number in decades.

Recent tax changes to buy-to-let laws, expected to make landlords want to sell their existing portfolio, have not had the effect desired by the government as landlords hold onto their current stock but delay buying up new properties.

Normally, when something is scarce, the price goes up. However, it is not pushing prices up either because the number of buyers has dropped meaning less competition for the available homes.

To many estate agents, the market looks in stalemate.

Should I be worried as a homeowner?

If you’re not intending to move and you can keep up repayments on your property, you have nothing to be concerned about. Slower house price rises (or house price falls) will not affect the size of your repayments – only interest rates can change that.

If you are thinking about selling, you may not get as much for your home as you believe it is worth. However, the person whose home you then buy and move into may also have to discount from the price they think their home is worth meaning that the financial effect on you may be neutral.