“How’s the Rotherham housing market doing?” asked one of our upbeat Rotherham landlords last week. “Quite strange”, I replied. Our landlord was a bit confused! Let me explain…
Even the Brexit vote has not fully hindered Rotherham’s steady rise in property value – property values in the area went down 0.92% last month but this still leaves Rotherham values 3.81% higher than a year ago and 8.9% higher than 20 months 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 Rotherham’s housing.
…and that is where the issue is.
Brexit, the coalition of the 2010-15, a double-dip recession and post-credit crunch fallout… I have been perplexed that the Rotherham property market (and values) has remained strong. That is until you start to look into the real reasons why we find ourselves in such a great place.
The Rotherham (and the UK) housing market is built on the foundations of basic economic rules that any A Level 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 that most of its Chartered Surveyors in the UK anticipated house prices to increase in the next six months, which seems contradictory given economic cautions from Mr Hammond and HM Treasury.
- Inflation could rise to around 2% to 3% in 2017 and perhaps a little more in 2018 (due of Sterling’s devaluation)
- There’s a high probability of a decelerating GDP
- A slight rise in unemployment could be seen
So, how can the RICS and most of my landlords be so confident about the value of our homes?
Well, look at from where we are starting. Nationally, there’s a base of low unemployment, low inflation and preposterously low interest rates. In Rotherham, 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 the end of March 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, Rotherham property values might drop slightly in 2017.
However, based on what we know currently, the UK and Rotherham 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 Rotherham housing market for a while longer – yet this may possibly spur some much needed second-hand market activity.