North West market predictions: A case of history repeating itself?

Has the outlook for our economic and housing markets really changed that much since 2022? Looking at UK GDP performance and forecasts as one indicator, the answer appears to be a resounding ‘no’, although the tone of messaging seems to be getting slightly softer and the economic waters seem slightly less turbulent.

Economic forecasts are probably best described as ‘grey’, with growth so low in 2023 that no one has even noticed, and nil or nearly nil national growth forecast for the next 2 years. So, whilst technically we may avoid a recession, the reality for many will be something that looks and feels a lot like one, especially with inflation remaining stubbornly above the 2% target and interest rates plateauing around current levels.

There are other economic warning lights flashing a bit brighter, with widespread concerns around reduced levels of business investment, increasing unemployment, rising public sector debt, along with ever-fluctuating energy prices, and the ongoing impact of Brexit legacy costs. Collectively this all adds up to a likely period of UK economic stagnancy.

But things could always be worse…couldn’t they?

When interest rates started to climb about 12 months ago, following the controversial interventions of Kwasi Kwarteng and Liz Truss, many market commentators predicted interest rates to top 7% and for a housing market crash similar to that of 2008.

Thankfully, this hasn’t materialised and so for now at least, commentary on the housing market seems to be softer in tone, matching Bank of England Governor Andrew Bailey’s prediction of a period of “adjustment”. Depending on where you are and who you listen to, house prices may continue to slide by between 2% and 10% next year, before some predicted stabilisation as we head into 2025.

The picture and outlook aren’t so uniform for all sections of the market. Whilst housing has never been so expensive, the demand for somewhere to live has never been so great in recent memory. Nowhere is this demand for housing more acute than for newly formed households and first-time buyers, who are either competing in an already, over-priced and under-pressure private rented sector or chasing the ever-diminishing, undersupplied prize of affordable home ownership. Our own sales data supports this view, with shared ownership homes often more highly prized than Tracy Island on Christmas morning in the early 1990’s!

Other sectors of the housing market are, however, not performing so well. The outlook for higher-priced homes is less favourable, with fewer properties coming to market, fewer buyers, higher costs, and extended sales periods. While estate agents are now offering some kind of discount across half of their properties, housebuilders have generally held firm on their asking prices, relying instead on a growing array of assistance schemes and incentives to attract buyers. Both interventions signal a challenging 2024 for us all.

Is the picture for the North West any different?

There is evidence to suggest that some locations within the region are for now, riding things out better than others. Performance is by no means consistent across all local authorities; influenced by factors including comparative underlying value, connectivity, as well as levels of recent housing supply (or lack thereof). Manchester city centre seems likely to continue as the housing investment capital of the North. These places and market sectors aside though, the post-pandemic adjustment is either already evident or soon will be.

The build-up to a General Election is always an interesting ride in housing, especially with the realisation by our politicians of the quality issues affecting existing housing and the need to deliver more homes to meet demand. Election manifestos will no doubt promise the earth (without ever really wanting to build on it), and any new political term may make a play for the reintroduction of meaningful housing targets or provide the help and assistance the planning system so desperately needs – we can but hope.

Whatever the next general election has in store, Onward Homes’ ‘manifesto’ will remain largely unchanged. Our Strategic Partnership with Homes England provides a clear mandate to increase the supply of high-quality affordable homes to meet rising demand in our communities and we will continue to seek like-minded partners to realise development opportunities. While our £1bn plus development programme will ultimately deliver 5,000 new homes by the end of the decade, we will equally invest in our existing homes over the same period. By improving the energy efficiency of some of our oldest homes, we can ensure the supply of housing that is not only affordable to access, but also more affordable for customers to run over the longer term.

The broader housing supply questions will, however, only truly be answerable when the economic conditions are more positive. As we may be some way off that point, we can probably expect some interim sticking plasters in the short term, but ultimately more shades of economic grey for some time to come.