The party conference season has underlined the deep differences of political opinion on how to approach Brexit and the strategy for managing the UK economy. Despite record high levels of employment, the climate of uncertainty is affecting business and consumer confidence, and UK growth has slowed, counter to the trend for other major global economies.

The recent performance of the housing market is similarly divided. Slower growth and hikes in stamp duty rates for more expensive properties have meant turnover has declined, as people stay longer between house moves.  House price growth has stalled or reversed in more expensive parts of London and its commuter belt, where the rebound in prices since the financial crisis has reached limits of affordability, and where recent tax changes have hit hardest.  By contrast, outside London, prices have continued to rise across every region, with the Midlands, northern England and Scotland still seeing year-on-year increases of 5% or more.

Tax changes have also combined to make buy-to-let property a less attractive option for private investors, prompting a spate of selling by private landlords across the country.  This is eroding the supply of rental stock, although demand is continuing to increase.  The resulting shortfall is pushing rents higher, and is creating opportunities for institutional investors to enter the sector.

Looking ahead, whatever happens with a Brexit deal (or not), we face a prolonged period of economic and political uncertainty, not just confined to the UK.  No one is sure what they are planning for, so contingency planning and forecasts are likely to err on the side of gloom.

That said, we are probably close the point of maximum uncertainty now.  One way or another, as the shape of a deal emerges, or conversely the prospect of “no deal” becomes a reality, some of the fog will clear, and decision-making will start to adjust to the new climate.

Accordingly, it is quite possible that business sentiment and investment activity will pick up faster than most people currently expect as we adjust to the new reality – whatever it is.  Although the confusion over Brexit is currently dominating the assessment of risks to the UK’s prospects, a lot of that will pass.  The wider global threats from protectionism and political polarisation may well prove more significant for investment markets in the long run.
Despite the uncertainties, it is interesting to note that none of the independent forecasters polled in the Treasury’s latest (September) survey expected a general decline in house prices for 2019.  The 16 forecasts in the survey ranged from 0.3% to 4%, around an average of 2.7%.  While property prices fluctuate with economic fortunes, the residential market, underpinned by the steadily growing demand for housing, has shown through successive cycles that it can be more resilient to downside risks than many other forms of investment.

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