“How's the Warminster housing market doing?” asked an upbeat Warminster
landlord last week. “Quite strange”, I replied. Our landlord was
perplexed! Let me explain...
Even the Brexit vote has not hindered Warminster’s steady rise
in property value, as Warminster property values went up 2.15% last month
alone, leaving Warminster values 10.57% higher than a year ago. An increase in
demand from buyers and an uninspiring level of supply (i.e. the number of
properties on the market) has driven up the value of the Warminster’s housing.
...And that is where the issue is. With Brexit, the coalition of
the 2010-15, a double-dip recession and post credit crunch fallout – I was
perplexed that the Warminster property market (and values) has remained so
strong, still 16.8% higher than 20 months ago. That is until you start to look
into the real reasons why we find ourselves in such a great place.
The Warminster (and the UK) housing market is built on the
foundations of basic economic rules that any GCSE Economics student should
understand. However, at a time when, as a country, we seem eager to uncouple
ourselves from all manner of proven facts, anything is up for grabs.
Even the wary RICS said throughout the UK, most of its Chartered
Surveyors anticipated house prices to increase in the next six months, which
seems contradictory
given economic cautions 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 RICS and most of my landlords be so
confident about the value of our homes?
Well, look at from where we are starting. Nationally, a base of
low unemployment, low inflation and preposterously low interest rates, while in
Warminster, the local economy is doing quite well for itself. Confidence also
plays a part. Confidence can supersede basic economic facts for a short time at
least, which is why actual property market changes tend to be more exaggerated,
as confidence can turn both positive and negative very quickly. The fact
is, there is a long-term relationship between property values, wages and
unemployment.
For example, looking at the graph below, you can quite 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. As a country, we are in a good place.
By April 2017, Article 50 will be invoked. This will bring
additional political tomfooleries and economic ups and downs. With both
purchasers and vendors predisposed by the 24-hour news cycle, which let’s face
it, gets more haphazard by the day, it is likely to prove a challenging couple
of years … and yes, Warminster property values are likely to 2017,
but based on what we know of the UK plc now, the UK and Warminster property
values are not projected to move that much over 2017 or 2018. Going into the next two years, we are in much
better financial shape as a country compared to the last two crashes of 1987
and 2008.
But, on the other side of the coin, what we also know is that we
don't know much about the form of our economic future or indeed many other
facets of our lives. Confidence will continue to be the key player in the Warminster
housing market for a while longer - yet this may spur some much needed
second-hand market activity? Now, where is my crystal ball?
