PART III: the UK Macro and Micro Factors

Following on from Part 2 of The UK Housing Market in 2019: the Deep Trends, where I analysed domestic 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 more granular details in the UK economic landscape.  

In this particular article, I will take into account the domestic macro and micro factors expected to influence the UK housing market in 2019: auto-correlation of activity; supply and demand; individual expectations; and trends such as changes in fashion and personal wealth. 

Auto-Correlation: A Buyer’s Market

Have you ever noticed how people talk about ‘property prices going up’ in an area. There is a palpable excitement to the phrase, like a panhandler telling you about a fresh seam of gold they have heard about up yonder. Word of mouth spreads. Before too long, other people start buying in the same area, hoping to get in on the wave of price increases while they still can.  This pushes prices up further, encouraging the next batch of people to buy in before it is too late. 

The same buying behaviour can be seen in most markets – from cryptocurrency to the latest fashion sales. Property prices are auto-correlated and, because of this, we can often predict that the future will closely resemble the present. The UK housing market has seen a significant decrease in the volume of transactions over the last year. The uncertainty around Brexit and the current extremely high property prices in many parts of the UK have led to reduced volumes of transactions in the housing market. Factors such as changes to stamp duty and the dynamics of overseas buyers also had a negative impact last year.  

These reduced volumes are likely to continue until such time as something significant changes in the political and economic environment, which gives people more clarity on what the immediate future may hold. 

It is worth noting that the housing market in Australia is currently going through this period of auto-correlated decline. This is after having gone through an extended period of auto-correlated price increases previously. People in Australia are now waiting for the market to ‘bottom out’, but it is expected to continue to decline by a further 10% – and so, they keep waiting. However, lower transaction volumes do not necessarily create a directional impact on the market.

Overview – Expect low volumes to remain and for that to push down prices after some time

Supply and Demand