- Tight housing supply is constraining purchases and fuelling price
- Housing market sentiment is weakening, but still positive
- Growing economic uncertainty is dampening outlook
In 2019 house prices will increase less than in 2018. The downturn in housing market sentiment points to a deceleration to 6%. Our earlier forecast for 2019 was 7%. However, due to the more subdued GDP growth outlook amidst mounting economic uncertainty and the ensuing stock market corrections, we have reduced our price projection by one percentage point to 6% for 2019, slowing to 4% for 2020. This puts the price increase slightly above the historical average. Contributing factors to this sustained buoyancy are the persistent low mortgage rates and the prospect of continuing tight supply in the years ahead.
One signal of the weakening price momentum was the falling number of transactions in 2018. This decline is clearly related to the elevated prices, which have impacted on affordability and reduced the urgency to buy. There is also less pent up demand. The majority of those who postponed their house purchase plans during the crisis have now moved. Another drag on transaction volumes is the lack of properties for sale. This is partly due to home movers preferring to buy before putting their existing home up for sale. We expect this cautious stance to steadily diminish, leading to more properties coming onto the market. Nevertheless, we still see a further decline in transactions in the period ahead.
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