James Allen, head of Walker Crips Alternative Investments, discusses his view that UK house price growth will continue a sustainable upward trajectory, following findings from today's Nationwide House Price Index.
Annual UK house price growth remains strong, although this month has seen a slowdown of 0.3%. This is against a backdrop of geopolitical uncertainty with Brexit and political populism affecting sentiment. The uptick in UK inflation will put pressure on affordability as household incomes fail to keep pace with moderate house price growth. As the affordability index is nearing peak levels, we would expect this to apply some breaks to house price growth.
This more sustainable level of growth is good news for the property market in the UK and shows that it is behaving sensibly, at least for the time being. A property market offering between 4-5% growth in these turbulent times provides an attractive and sustainable risk return profile in the medium to long term.
A surprising increase in home rentals from the 45-54 and 55-64 age groups indicates continuing demographic shifts to more single adult households and this increased demand will be offsetting some of the price pressure from low affordability. Geopolitical risk from the EU and US may well put price pressure back into the London market and see the UK property market act as one of the most sensible asset classes. This is not something you can say that often and the potential for sustainable, moderate property growth will do investor sentiment no harm at all.
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