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House prices still feeling Brexit pressure

Daniel Lane

Daniel Lane - Fidelity Personal Investing

With only a matter of weeks to go until the UK’s scheduled departure from the EU, uncertainty over the nature of the withdrawal is keeping a cap on the nation’s house prices.


Annual house price growth slowed to 1.1% in September, with the month registering a -0.4% fall according to figures released this week from the Halifax.

Managing director Russell Galley said: “Whilst this is the lowest level of growth since April 2013, it remains in keeping with the predominantly flat trend we’ve seen in recent months.”

The report supports a similar story from Nationwide, whose latest House Price Index puts the monthly change at -0.2%, bringing annual growth down to just 0.2% by their measure.

This marks the tenth consecutive month of sub 1% growth for UK houses, with the company’s chief economist Robert Gardner highlighting the Brexit effect: “Indicators of UK economic activity have been fairly volatile in recent quarters, but the underlying pace of growth appears to have slowed as a result of weaker global growth and an intensification of Brexit uncertainty.

“Looking ahead, we expect activity levels and price growth to remain subdued while the current period of economic uncertainty persists.”

On the surface this paints a rather gloomy picture for the nation’s homes but the ill effects aren’t hitting all parts of the country equally. In fact, most regions outside London and the south east of England posted positive percentage growth during the third quarter of this year, with Northern Ireland the strongest performing home nation, albeit with its growth rate dropping to 3.4% from 5.2% in Q2.

Wales and the north west posted growth above 2% as well but with London exhibiting an annual price fall of 1.7%, it is the capital bringing overall figures into negative territory.

This is the ninth quarter in a row that London prices have fallen however, houses in the capital are still around 50% more expensive than the peak levels seen in 2007. In comparison, UK prices on the whole are only 17% higher. Some of the best performing regions still have a long way to go to match even a declining London market.

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. Investors should note that the views expressed may no longer be current and may have already been acted upon. 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.

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