UK Residential Housing Market Report 2014 Q1

Transcription

1 Residential Housing Market Report Q1

2 About Experian s UK house price database and report With growing concerns of a potential housing bubble and growing disparities in the performance of the UK residential housing market, it is ever more important to understand: 1. What will be the future capital values in your secured lending portfolio and what are the associated values at risk? 2. Which areas will have the strongest growth in house prices? 3. Will current lending practices be appropriate going forward as house prices continue to outstrip income growth? Increase the accuracy of future house price movements using Experian s future estimates of house price movements at a local authority level of geography, rather than relying solely on national level house price data and forecasts. Experian provides historical and forecast house price data at national, regional and local authority levels and income measures for you to append to your books. Narrative is provided with an accompanying UK house price report analysing the key drivers of house prices and affordability. Both the database and report are updated every quarter to give you the freshest set of forecasts.

3 UK Housing Market: Recent Trends Forecast Summary House Prices (based on DCLG data) y-on-y % Growth UK Greater London South East East of England South West East Midlands West Midlands Yorkshire & the Humber North West North East Wales Scotland Northern Ireland UK house prices rose by 2.6% q-on-q in q1 Demand, buoyed by brighter economic conditions, has outpaced growth in supply Government policy remains supportive of further robust house price growth Highlights Continued evidence of increasing momentum in the UK housing market UK house prices have maintained their recent strong growth, rising on average, by 2.6% q-on-q in q1, according to the latest seasonally adjusted Nationwide quarterly house price index (released on 2nd April ). This means that house prices are now 9.2% higher than in March, providing further evidence that the turnaround in the housing market is well underway. There are also signs that the housing recovery is widening outside of London with increases seen in all UK regions in the second half of. However large geographical disparities remain with London recording annual house price growth of 18% with the North recording just 5.9%. We expect house prices to continue along their upward trajectory against the backdrop of a strengthening UK economy and supportive government policy, partly driven by the imbalance between supply and demand. The UK economic recovery is now firmly entrenched with all sectors of the economy making a positive contribution to growth. Confidence is increasing, buoyed by higher employment and the return of some real wage growth. The combination of cheap credit, low interest rates and continued government stimulus via the Help to Buy scheme will help support the revival in demand for housing. The supply of homes on the market is, for the moment, outstripped by demand that has been inflated by the factors discussed above. Thus, for the moment, it is the demand side of the market that is firmly driving the price trend and we expect this trend to persist in the near term.

4 UK Economic Prospects GDP outlook UK Recent Trends 2-Year Outlook Labour Market Longer-Term Outlook Inflation Prospects & Key Risks GDP rose by 0.7% q-o-q in q4. Recent anecdotal data has been very positive pointing to another strong outturn in q1. Real GDP growth forecast at 2.6% in followed by a similar outcome in Key risks: Weaker growth if real incomes, investment and eurozone demand fail to recover. Labour market progress will remain solid in next few months in line with recent output gains. Key risk: Private sector job creation fades as productivity gains account for output rise. GDP growth of 2.4% a year in , with annual employment growth of 0.8%. Key risk: Efforts to restore public and household finances constrain growth even more than forecast. Inflation fell to 1.7% in February. We expect the rate to remain contained in the months ahead. Key risk: Prospects of lower inflation undermined by upsurge in oil and/or food prices. The UK economy grew by 0.7% q-on-q in q4. The economic recovery is firmly entrenched as the flow of strong data that has emerged over the past year continues. to defy the headwinds that are likely to constrain growth. Buoyant services, manufacturing and construction activity underpin our forecast that GDP growth will reach 2.6% in followed by 2.5% in But growth remains overly-reliant on consumers and key risks persist. Despite the positive contribution of net trade in q4, trade figures are volatile and lingering eurozone weakness means that despite the propitious investment picture, rebalancing away from consumers remains elusive. Labour market outlook Interest rates Sterling Consumer Business Investment Bank Rate to remain on hold at 0.5% until the first half of But the strength of the upturn means that risks of an earlier move have increased. We expect the to make modest gains against the euro next year but to stabilise vs the US$. Key risks: rises dent export efforts. Spending to temper in line with real income growth. Key risks: Inflation; earnings growth remains weak. Business investment finally posted positive growth in q3 and q4; growth will strengthen from now. Key risks: Business confidence weakens. Government Fiscal tightness to continue at least until Key risk: Chancellor eases austerity ahead of 2015 general election. Trade Credit Exports have been weak recently but are expected strengthen modestly later in. Key risks: Demand in eurozone fails to pick up; global recovery loses momentum. Consumer credit has eased after a difficult few years. Key risks: Banking crisis re-emerges Employment is responding positively to output trends, rising by about 1 million in the last 2 year and the unemployment rate has fallen from 8.3% at end- to 7.1%. Pressure on real disposable incomes is continuing to ease. Inflation was down to 1.6% in March while average earnings rose to 1.7% in the three months to March as the benefits of recovery finally fed through to pay packets. The latest figures reinforce the picture of a robust economic recovery in the UK. UK y-on-y % Growth 2015 GDP Employment Inflation US Dollar-Sterling rate

5 Index, 50=no change Balance, % % change, year-on-year % change, year-on-year UK UK Economy: Recent Trends The UK continues to enjoy strong growth 6 4 GDP The labour market is on an upward trend 2.5 ILO Employment Source: Experian Source: Experian -2.5 Survey evidence points to further expansion 65 Monthly Services PMI 5 Consumer confidence edges up but remains weak Monthly Consumer Confidence Source: GFK Source: CIPS

6 Economics from Experian Our economic forecasting expertise Experian's team of 20 economists is a leading provider of global, national, regional and local economic forecasts and analysis to the commercial and public sectors. Our foresight helps organisations predict the future of their markets, identify new business opportunities, quantify risk and make informed decisions. Experian s economics team is part of a 140-strong analytics division, which provides an understanding of consumers, markets and economies in the UK and around the world, past, present and future. As part of the Experian group, the analytics division has access to a wealth of research data and innovative software solutions. Its statisticians, econometricians, sociologists, geographers, market researchers and economists carry out extensive research into the underlying drivers of social, economic and market change. For more information, visit About Experian Experian is a global leader in providing information, analytical and marketing services to organisations and consumers to help manage the risk and reward of commercial and financial decisions. Combining its unique information tools and deep understanding of individuals, markets and economies, Experian partners with organisations around the world to establish and strengthen customer relationships and provide their businesses with competitive advantage. For consumers, Experian delivers critical information that enables them to make financial and purchasing decisions with greater control and confidence. Clients include organisations from financial services, retail and catalogue, telecommunications, utilities, media, insurance, automotive, leisure, e- commerce, manufacturing, property and government sectors. Experian plc is listed on the London Stock Exchange (EXPN) and is a constituent of the FTSE 100 index. Total revenue for the year ended 31 March was $3.9 billion. Experian employs approximately 15,000 people in 40 countries and has its corporate headquarters in Dublin, Ireland, with operational headquarters in Nottingham, UK; Costa Mesa, California; and São Paulo, Brazil. For more information, visit Contact Sadia Sheikh UK Regional Economist E: sadia.sheikh@uk.experian.com T: +44 (0) Stephen Adams Managing Economist E: stephen.adams@uk.experian.com T: +44 (0) Copyright Experian Apart from fair dealing for the purpose of research or private study, or criticism or review, and only as permitted under the Copyright Designs and Patents Act 1998, this publication may only be reproduced, stored or transmitted, in any form or by any means, with the prior permission in writing of the Publishers or in the case of reprographic reproduction in accordance with the terms of the licenses issued by the Copyright Licensing Agency in the UK. US copyright law is applicable in the USA. This document is issued by Experian Ltd. While all reasonable care has been taken in preparing this document, no responsibility or liability is accepted for errors of fact or for any opinion expressed herein. Opinions, projections and estimates are subject to change without notice. This document is for information purposes only. It does not constitute any offer, recommendation or solicitation to any person to enter into any transaction or adopt any hedging, trading or investment strategy, nor does it constitute any prediction of likely future movements in rates or prices or any representation that any such future movements will not exceed those shown in any illustration. The contents of this document are not made with regard to the specific investment objectives, financial situation or the particular needs of any particular person. Any investments discussed may not be suitable for all investors. Past performance is not necessarily indicative of future performance; the value, price or income from investments may fall as well as rise. Experian Ltd, and/or a connected company, may have a position in any of the instruments or currencies mentioned in this document. You are advised to make your own independent judgment with respect to any matter contained herein. The word 'Experian' is a registered trademark in the EU and other countries and is owned by Experian plc and/or its associated companies