Last week a Colchester landlord asked me “How’s the Colchester housing market doing?” to which I replied “Quite strange” and went on to explain. Colchester property values went up 2.65% last month alone, leaving Colchester property values 14.5% higher than a year ago. An increase in demand from buyers and the continuing shortage of properties on the market is the underlying issue which has driven up house prices in Colchester. Even Brexit, a double-dip recession and the credit crunch hasn’t dented the steady rise in property values or the continued demand for properties in Colchester, which is surprising, until you look at the underlying reasons.
The Colchester (and UK) housing market is built on basic economic rules that are easy enough for anyone interested enough to understand but at a time when we, as a nation, seem able to willfully ignore proven facts anything is up for grabs.
Even the Royal Institution of Chartered Surveyors (RICS), who are usually cautious, said throughout the UK most of its Chartered Surveyors anticipated house prices to increase in the next six months. This seems to contradict the economic caution from Mr Hammond and HM Treasury. Even though inflation will rise to around 2% to 3% in 2017 and perhaps a little more in 2018 because of Sterling’s devaluation, together with a high probability of a decelerating GDP and a slight rise in unemployment, how can the RICS and most of my landlords be so confident about the value of our homes?
Consider we’re starting nationwide from a baseline of low unemployment, low inflation and low interest rates. In Colchester, the local economy is doing quite well for itself and confidence also plays a role. In the short term confidence can be enough to ignore basic economic reality for while but this can also turn negative very quickly which is why property market changes tend to be more exaggerated. Whatever the property market is doing there is a long-term relationship between property values, wages and unemployment. Take a look at the graph and you can clearly see the ratio of property values to earnings is nowhere near as high as it reached in 2008 and currently is in the middle of the range for the last 30 years so, as a country, we are in a good place.
By April 2017, it looks likely Article 50 will have been invoked and we can expect another round of political infighting, media speculation and both purchasers and vendors alike will be bombarded by the 24 hour news cycle. It’s likely to be a challenging couple of years with economic ups and downs but based on what we know of the UK plc right now, the UK and Colchester property values are not projected to move that much during 2017 or 2018. As a country, heading into the Brexit negotiations, we are in much better financial shape compared to the crashes of 1987 and 2008.
On the other side of the coin, given the uncertainty of our economic future, which affects so many other aspects of our lives, confidence will remain a key factor in how the Colchester housing market performs – and may spur some much needed activity in the second-hand market.
What do you think will happen to property values in Colchester? How do you think Brexit will affect the Colchester housing market? Give me a ring on 01206 862288 to discuss any aspect of the Colchester property market. Alternatively email firstname.lastname@example.org or add your comments below.