Colchester housing market unemployment 2012-2016

Colchester Unemployment Down to 3.7%. How Does this Affect the Colchester Housing Market?

In May 2016, Rt Hon George Osborne, MP for Tatton,  published an official HM Treasury analysis stating UK house prices would be lower by between 10% and 18%, by the middle of 2018, compared to what is expected if the UK remained in the European Union. Nine months after the Referendum let’s take a closer look how this affects the Colchester housing market…

One of the usual indicators of the state of the UK and Colchester housing market is the share prices of the big UK builders. Two weeks after Brexit:

  • Barratt share prices dropped by 42.5%
  • Taylor Wimpey share prices dropped by 37.9%

The latest Land Registry data shows property values in Colchester are up just 0.31% up month on month and July saw property values rise by just 1% which are both lower than expectations.

In several recent blog posts I’ve explained that looking at the Colchester housing market in the short term isn’t a reliable indicator. It’s clear the dramatic property price increases between 2011 and 2016 are behind us and, on balance, that’s probably a good thing. Even during that period the growth in property price increases wasn’t a straightforward upward trend. For example, Colchester property prices dropped by 1.71% in February 2012 and 1.48% in January 2015 but over the longer term it’s clear to see those drops were just short term blips.

Colchester property values are currently 12.05% higher than this time last year and the average value of a Colchester property has risen to £311,700. Looking at the new home builders share prices since early July:

  • Barratt share prices increased by 43.3%
  • Taylor Wimpey share prices increased by 37.3%

The Office for Budget Responsibility, the Government Spending Watchdog, recently revised its forecast for house-price growth down for the coming years – but only slightly.

The Colchester housing market has remained stable, at least in part, because the wider economy has performed better than expected since Brexit. There’s a generally reliable link between the rate of unemployment and property prices and a less reliable indicator related to wage growth. Looking at the unemployment figures for the Colchester Borough Council area:

  • 2012: 6,500 people (7.4%) unemployed
  • 2016: Currently 3,600 people (3.7%) unemployed

Inflation is currently the only indicator heading in the wrong direction. According to the pundits inflation looks likely to rise over 3% in the latter part of 2017, as the drop in Sterling since late 2016 translates into higher prices for UK imports. If that happens the Bank of England, in order to meet the 2% inflation target, may increase interest rates anywhere from 0.25% to over 2%. On the upside 81.6% of new mortgages in the UK over the last two years have been fixed-rate mortgages which will help smooth out the increase. Compared to the 15% interest rates in 1992, which some of us endured,  the potential increase doesn’t look so scary!

As we’ve discussed before the greatest risk to the Colchester property market, and wider UK property market, remains the ongoing shortage of new houses which keeps house prices artificially high. That’s good news if you’re already on the property ladder but painful for first-time buyers. I’ll be discussing both these topics in forthcoming Colchester property market articles so, if you haven’t already, please sign up to my Colchester Property Blog newsletter so you don’t miss those.

In the meantime if you’d like an informal chat about any aspect of the Colchester housing market give me a ring on 01206 862288 or email grahamwood@hometorent.co.uk. I’m always happy to offer a free opinion on any property you’re interested in – send me a Rightmove or Zoopla link and I’ll get back to you, often within 24 hours.

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