House prices: Brexit still hitting growth

Daniel Lane

Daniel Lane - Fidelity Personal Investing

Brexit uncertainty and a lack of properties coming to market paint a dreary picture for UK housing, according to a report published this week by the Royal Institution of Chartered Surveyors (RICS).

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Figures from the April 2019 RICS UK Residential Survey show last month saw the biggest fall in the number of properties put up for sale since 2016, staying close to February’s levels - the weakest in almost eight years.

Reading into the numbers, while core data from the latest Halifax House Price Index show house prices have been rising on average across the country, those in London have fallen, followed closely by the South East, due to unaffordable prices for many buyers, tax changes affecting rental properties and the UK’s looming departure from the EU.

Russell Galley, managing director of Halifax, said: “The index has seen a weaker pace of growth over the last three years, which is consistent with the easing of transactions volumes and housing market activity reflected in RICS, Bank of England and HMRC figures.”

Prices rose by 1.1% in April, according to the Halifax with Nationwide figures differing slightly at 0.9% growth for the month. Chief economist Robert Gardner put the sluggish figures into perspective: “April marks the fifth month in a row in which annual house price growth has been below 1%.”

It might not be news that Brexit has all but called a halt to enthusiasm in the housing sector but slowing growth will come as a relief for one group in particular - millennials.

Today’s young people face an uphill battle in gathering what are now substantial deposits for housing regularly valued at nearly 14 times the average salary in London. The same measure saw a multiple of 4.5 times average earnings in 1996.

As a result, London’s housing market has led the way in declining house prices over the past two years, with the region accounting for the lion’s share of all UK housebuilders’ apartment sales.

And to add to the gloom, millennials hoping to rely on an inheritance to get further up the housing ladder might need to think again. Research conducted by Charles Stanley suggests that 22% of millennials expect to receive inheritance to use as a deposit, although official statistics suggest only 7% actually do so. Even then, the amount bequeathed sat at an average of £11,000 against expectations of £130,000.

As we live longer, older generations are having to make use of savings earmarked for adult children. Simple living costs as well as planning for care in old age means it’s more important than ever that young people take responsibility for their own savings, and get started as early as possible.

The odds may be seemingly stacked against this generation but there is one simple advantage they hold - time. Making use of tax-efficient ISAs early enough to allow the slow and steady compounding effect to kick in can mean the difference between being a home-owner and a renter in the long term.

If you’re looking for a simple way to start making the most of your ISA, or know a millennial who could do with the help, a good starting point is Tom’s ISA Picks for this year. These are four funds, investing in different regions around the world, specifically chosen by our investment director Tom Stevenson from our Select 50 list of recommended funds.

Important information

The value of investments and the income from them can go down as well as up, so you may get back less than you invest. Tax treatment depends on individual circumstances and all tax rules may change in the future. Select 50 is not a personal recommendation to buy or sell a fund. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to an authorised financial adviser.