Subdued growth forecast in local housing market after strong 2018
HOUSE prices in the north are set to rise this year at one of the highest rates in the entire UK, but the forecast is not so bright in the years ahead, according to a new report.
Average prices in Northern Ireland are due to grow by 3.6 per cent, the fourth highest of all UK regions according to KPMG.
However, in its UK Economic Outlook Report the business advisor forecasts that despite the strong performance expected in 2018, growth will slow each year up to 2022.
It is predicted prices will rise by 2.9 per cent next year, 1.9 per cent in 2020 followed by 1.8 per cent and 1.3 per cent in 2021 and 2022 respectively.
This mirrors the pictures across the UK with areas such as London and the south east of England, both of which experienced the sharpest increase in prices over the last few years, expected to see the most modest growth. Notably, house prices in London are expected to decline for the next three years.
The report also predicts that the UK economy will experience modest growth if a positive Brexit deal can be reached with the EU. KPMG forecasts that UK GDP will grow by 1.3 per cent this year and 1.4 per cent in 2019. This would mark the lowest rate of growth since 2008 and 2009.
The estimates are based on an assumption that the UK government will achieve a relatively friction-free Brexit and transition deal. If a disorderly Brexit were to occur, KPMG predicts a rapid slowing of growth to 0.6 per cent in 2019 and 0.4 per cent the following year.
In addition to Brexit uncertainty poor productivity is also cited as economic growth inhibitor, with businesses finding it increasingly difficult to recruit because of dwindling spare capacity. In addition, despite high employment levels, the reports predicts workers can expect pay growth of around 3 per cent.
Reflecting on the report, Yael Selfin, chief economist at KPMG UK, said:
“Brexit will have a lasting effect on the UK, but economically it isn't the only game in town. Issues such as improving productivity, reducing regional economic disparity, and ensuring that UK workers have the skills to meet employers' needs should also be at the forefront of the Chancellor's mind. Bringing productivity growth back to pre-2008 levels alone could see the British economy grow by more than 2 per cent."
KPMG predicts that rates will stay on hold until November 2019, with another 0.25 percentage point rise scheduled if Brexit negotiations proceed smoothly. Interest rates are likely be cut to at least 0.25 per cent if negotiations are not successful, with additional measures to be announced by the Bank of England to ease any significant pressure on the banking sector.