We’ve seen good increases in value over the last few years, but what will happen now?
Tim Hollingsworth, managing director of local estate agency and surveying firm Rumball Sedgwick, has some reassuring news for householders.
“Anyone who owns property knows that when house prices are increasing, we all feel more wealthy, and more confident about borrowing money, which we subconsciously set against the ‘capital’ we have in our property. And over the last few years, residential property in this area has performed very well, which has made us all feel confident – house values in Watford have increased by 7% in the last year, and by 34% in the past 3 years.
This means that if you bought a house for £400,000 in 2014, it would be worth £536,000 now!
However, anyone involved in business locally will know that over the last few months, economic uncertainty has grown, which is having a negative effect on business investment and confidence.
Some of this uncertainty has now started to be felt by consumers as well, with inflation going up and the value of the pound at historically low levels. A number of recent economic statistics have pointed towards a slowdown in the housing market – which has a profound effect on how confident we feel, as the value of our property underpins our willingness to spend and borrow money.
However, here at Rumball Sedgwick, we believe that property owners should not feel too gloomy, and that there is cause for optimism.
Many of you may be remembering that, following the financial crash of 2008, property values dipped significantly, as we can see on this graph from the ONS:
However, what the graph also shows us, is that in the 3 years before the crash of 2008, property values had been increasing at a much higher rate than they have over the last few years. The steady rate of growth over the last five years leads us to think that this growth has been due to underlying factors, particularly an excess of demand over supply, rather than a speculative bubble, which was the case prior to 2008.
We think this means that any reduction in property values is likely to be much less severe than in 2008 – indeed, we think it is most likely that there will not be any reduction in values at all, and that values will stay steady for a period of 2-3 years, before rising again.
Additionally, there is no sign of any will amongst any of the political parties to build significant numbers of new houses, which is the only thing which would change the underlying issue of restricted supply of housing stock.
We think that in the medium to long term, demand for housing will stay high in the South-East, as loosening of European regulations may pull in more international investors and entrepreneurs to London.
And lastly, the recent sharp devaluation of the pound probably means that most of the negative economic effects of leaving the EU have already been ‘priced in’ by international investors – so the pound should gradually regain value, bringing inflation back down again.
So although there is some uncertainty about, we think you can at least be confident that your property will continue to hold its value, and maybe increase modestly, over the next couple of years.”