The outlook for the UK economy and house prices remains challenging in 2013, according to the latest Halifax UK Housing Market Outlook for 2013, but house prices likely to remain strongest in London and the South East.
The UK property prices will continue to rise, although very slowly, beyond 2013 as the economy shows signs of recovery. Martin Ellis, Halifax’s housing economist, said, “Conditions in the housing market are likely to remain much as they are against this economic background. Accordingly, we expect continuing broad stability in house prices nationally in 2013. Prices are again likely to end the year at levels close to where they begin with the market continuing to lack any genuine direction.”
“The outlook for the UK economy remains highly uncertain. Risks in the global economy remain significant and how these evolve will be key determinants of how activity in the UK progresses over the coming year.”, Ellis added.
Subdued economic growth, sustained high levels of unemployment and ongoing pressures on household finances will all continue to constrain housing demand. The fiscal tightening programme, combined with many families continuing to seek to reduce their debts, is likely to significantly curb households’ ability, and willingness, to spend. Rising utility prices, in particular, threaten to keep inflation above the government’s 2% target – at around 2.5-3% next year, according to Halifax.
Halifax reports that the relatively low level of mortgage payments in relation to income will continue to provide support for house prices. Mortgage payments for a new borrower will remain significantly below the long-term average as a proportion of disposable earnings.
Typical mortgage payments for a new borrower – both first-time buyers and homemovers – at the long-term average loan to value ratio, have nearly halved as a proportion of disposable earnings from a peak of 48% in the third quarter of 2007 to 26% during same period in 2012. This is significantly below the average of 36% recorded over the past 27 years, reported Halifax.