Time for Handforth to change gear?
The A6-M56 eastern airport road is heading to Handforth, promising to improve connections to Manchester airport in the west, and Stockport suburbs to the east, from autumn 2017. The £290m road could drive a market that’s been cruising for too long but now appears to have changed gear.
Handforth is a stable market dominated by cash-buyers, many of them are retired – 43 per cent cash-buyers, according to Countrywide research for Bridgfords. But you pay a price for stability, and houses have not increased in value as fast as they might. Countrywide data shows that the town kept pace with national and regional price growth until 2004, but missed out on the lift delivered to most places by the last economic boom.
The good news is that Handforth’s housing market has begun to pick up speed. Average prices are up 4.5 per cent in the last twelve months – substantially better than the regional average. This confirms an improving trend that dates back to 2011. However, the sudden acceleration does no more than wipe out the period when the town was driving with the handbrake on. Average prices are up just 1 per cent since 2007 – below national and regional trends.
Does the new road and rising prices mean the town is poised for recovery? Maybe, although there’s a risk demand could bypass Handforth and head direct down the new link road to “Waitrose” towns like Cheadle or Hazel Grove. This means pricing will be important in the next few years. Countrywide data suggests that on average in 2016 homes in Handforth sold for 2 per cent below their asking price.
Is a little bit of inflation a good thing? Maybe, maybe not.
As markets go into turmoil at each bit of Brexit news, it’s worth looking behind the volatility and seeing what the latest set of economic numbers are actually showing us.
The big news this month is the pick-up in inflation. It only reached 1 per cent, half of the Bank of England’s target, but the market only expected 0.6 per cent and this has caused some anxiety. It’s not because we weren’t expecting inflation to pick up – the drop in the currency means that it is inevitable – but because the increase in inflation “is not explicitly linked” to the fall in Sterling according to the Office for National Statistics. Rather its rise is due to the cost of clothing and fuel compared with last year when their prices were particularly low.
That doesn’t mean we should not expect price rises. Oil is priced in US$ and a 16 per cent fall in the US$/£ exchange rate means that this will flow through. And producer prices are now increasing as the effect of Sterling’s fall against major currencies hits too. That will hit all of our pockets in the coming months, especially as the cost of food and fuel – essentials we can’t avoid spending money on, rise.
But better news is that the UK’s labour market is still holding up despite the changes in sentiment across the rest of the economy. Even better news is that wage growth is still outstripping inflation which will provide some cushion to rising prices.
Fasten your seatbelts, it will be a bumpy time ahead, but not a hard landing.
The Brexit shock…
The vote to leave the European Union (EU) has unsettled the housing market, but the major driver of its performance will be the path of the economy. That is uncertain as the arrangements for decoupling from the EU and the effect this will have on trade have yet to be seen.
…will weaken markets…
In our central scenario we expect the economy to weaken and for this to affect house price growth and transaction levels as consumer confidence, household incomes and the labour market are affected. We expect UK house prices to see a growth of just 2.5 per cent in 2016 and -1.0 per cent in 2017, before recovering to 2 per cent in 2018.
… and the North and Midlands don’t escape
While London and South Eastern markets are expected to see the largest slowdown in prices, the North and Midlands are also expected to slow. Weaker economic growth takes part of the responsibility, but so too will uncertainty about export tariffs and inward investment, despite the support of a weaker currency. However we expect the North West to see the strongest growth out of all regions in 2018 to make up for price growth historically lagging behind that of the South.
Supply shortages will support prices while ultra-low interest rates will help to support demand…
The continuing lack of supply of property will remain a supportive factor for house prices across most of the country. And as the Bank of England has reduced rates and introduced more quantitative easing, mortgage finance will be available to help demand.
Uncharted territory brings big forecast uncertainties
There are higher than usual risks to these forecasts given the extraordinary nature of the challenges ahead. Most risks are to the downside and will be dominated by the UK’s ability to leave the EU in an orderly fashion and maintain its trade links and markets.