8 Months-on from the referendum, so how is Oxford property bearing-up?

In May 2016, George Osborne, published an official HM Treasury analysis stating UK house prices would be lower by at least 10% (and up to 18%) by the middle of 2018 compared with what was then expected if the UK remained in the European Union. So, eight months on from the Referendum, are we beginning to see signs of that prophecy?

Historically, good barometers for the housing market include the share prices of the big UK builders. Much was made of Barratt’s share price dropping by 42.5% in the two weeks after Brexit, along with Taylor Wimpey’s equally eye watering drop in the same two weeks of 37.9%. Looking at the most recent set of data from the Land Registry, property values in Oxford are 1.48% down month on month (and the month before that, they had decreased by 1.25%) – so is this the time to panic and run for the hills?

Well, as I have spoken about previously in my blog, it is dangerous to look at just short term indicators.  I have mentioned recently, the heady days of the Oxford property prices rising quicker than a thermometer in the desert sun are gone. Yet it might surprise you that during those heady years of house price growth, the growth wasn’t smooth and all upward. Oxford property dropped by an eye watering 3.77% in February 2013 and 1.34% in November 2014 – and no one batted an eyelid.

You see, property values in Oxford are still 6.01% higher than a year ago, meaning the average value of an Oxford property today is £495,000. Even the shares of those new home builders Barratt have increased by 43.3% since early July and Taylor Wimpey’s have increased by 37.3% clawing back most of their losses. The Office for Budget Responsibility, the Government Spending Watchdog, recently revised down its forecast for house-price growth in the coming years - but only slightly.

The Oxford housing market has been steadfast partly because, so far at least, the wider economy has performed better than expected since June 2016. There is a robust link between the unemployment rate and property prices, and a flimsier one with wage growth. Unemployment in the Oxford City Council area stands at 4,300 people (4.6%), considerably better than in 2013 when there were 5,500 people unemployed (6.2%).

However, inflation does worry me. Looking across the various opinions, it appears likely that inflation will hit 3% (if not more) in the latter part of 2017 as the fall in Sterling on the currency markets results in higher import prices. If that transpires, then the Bank of England whose target for inflation is 2%, may raise interest rates from 0.25% to 2% increasing the cost of borrowing.  However, 81.6% of new mortgages in the UK in the last two years have been fixed-rate and 2% remains well below long-term trends – I’m old enough to remember interest rates at 15% in 1992!

But, to my mind the greatest risk to the Oxford (and British) property market is that there are simply not enough properties being built thus keeping house prices artificially high. Good news for those on the property ladder, but not for those first-time buyers that aren’t! Next week, I will look at how property is performing differently in different parts of Oxford.