PART II: the UK Macro Factors

Following on from Part 1, where I analysed global macro factors in the forecasting the near-term future of house prices here in the UK and for 2019, I will now shift my focus to the meaty questions: what does all this mean for the UK’s economic outlook in 2019? And how will it affect the housing market? 

In this particular article, I will take into account the major domestic macro factors for the UK in 2019: UK economic growth; inflation; and, interest rates.

UK Economic Growth

There are a great many pundits and think tanks out there making economic forecasts. These forecasts are typically picked up by news outlets depending on their own particular political biases. Some come from very important sounding organisations, and most forecasts are inaccurate. It is incredibly hard to make an accurate forecast of a complex system where the majority of parts are unknown and the relationships between them can only be guessed. 

Oxford Economics, however, is one organisation that has come closest to accurately forecasting economic futures. It has published its forecast for the UK’s GDP growth at 1.5% in 2019, which is somewhere between the GDP annual growth rate for 2017 and 2018. We can safely expect, therefore, that the upcoming year will be somewhat like this year and the year before.  

Having said this, however, it could be that a no-deal situation in the on-going Brexit negotiations results in additional import and export tariffs. This change will increase the cost of purchases of EU products in the UK and vice versa, which may be offset by opening the UK up to greater trade opportunities with the rest of the world. Conversely, a trade deal with the EU could maintain the status quo.

Overview – No change

Inflation