A year in review: house prices, stock markets and Brexit
By Guest Blogger on 8 Mar 2018 in Industry News
By Ben Johnson, YOPA estae agents
Over the past 12 months we’ve seen a lot of changes, but when it comes to Brexit, it seems to be more of the same. We’ve gone from knowing relatively little about the proposed separation from the EU to knowing very little. The rhetoric coming from both sides has been tough yet lacking in any crucial details, and the government’s own reports appear to suggest that Brexit is an almighty bad step.
However, we thought we’d take a little more of an optimistic approach.
At the moment, yes, the stock market is falling, but that’s not down to Brexit. Instead, that’s down to a very strong American market that is anticipating interest rate rises in the United States. This means that access to easy credit (i.e. low interest rates) is likely to go down, primarily because the American economy is recovering and has been for the last six years. American stock markets go down, and the rest of the world follows. The Federal Reserve has also cut loose various bonds (U.S. equivalent of gilts), so there isn’t as much government borrowing in the market at present.
So let’s look at currency. At the moment, although the pound is nowhere near the strength it was before Brexit, it has slowly recovered, and the currency markets are pricing the pound around 1.40. This means that each dollar is worth around 70p, which is not too far off the 64p valuation that was before Brexit and much, much better than the 84p valuation it was at its lowest.
What about house prices?
House prices seem to match the overall optimistic trend. At the beginning of the year, the average house (which include those in London) was worth £215,670. Now it’s worth around £226,007. That’s a 4.8 per cent gain.
This flies in the face of original predictions, which estimated a 1.2 per cent gain for the entire year. This estimate was arrived at by estate agent Yopa, who essentially took a wide range of industry expert predictions and amalgamated them to come up with an overall prediction.
This prediction had a bit of a rocky start, with house prices initially dipping. But they rose significantly in the summer, leading to the possibility of a gain of more than 7 per cent. However, this potential gain died back thanks to a little bit of a lull during the autumn and winter months, some of which registered negative gains.
However, the housing market bounced back, and it’s clear that it’s carrying on from strength to strength despite the threat of Brexit and the potential instability this could bring.
So why is housing important?
Housing is just one of many metrics you can use, but it’s an important one. A house is most likely to be the most valuable asset anyone ever buys. As a result, people like to protect their investment. In addition, banks have to ensure their money is put to good use, which means ensuring people have the money to invest in housing and have the ability to pay off that investment.
In essence, housing represents long-term consumer confidence.
So Brexit isn’t so bad after all?
It goes without saying that everyone wants a successful Brexit, preferably with terms that are favourable to us. Moving into 2018, our advice is to keep an eye on house prices, the value of the pound and the stock markets to gauge how negotiations are going – because at this point, it’s the best data we have.