In the wake of the Brexit referendum, the property market in the UK has been quite unusual to watch. In some regions, inflation has been low, meaning house prices have not risen at the same rate as in the pre-Brexit years. However, analysts Hometrack have just upgraded their prediction of how much house prices will rise in major cities in the UK by the end of 2017 to a high 7% from their previous estimate, made in December, of 4%.
This is, of course, important stuff to follow if you are looking to buy or sell a house in the UK, but if you are just concerned with the markets and trading, is it beneficial to follow the UK housing market?
Macroeconomics and the UK Property Market
For traders looking to make the best decisions when they work with their forex broker, macroeconomics is always important – and the housing markets in countries where you are interested in the currencies for trading can be a very good barometer of things that can and will affect currencies.
As an example, the fact that Hometrack believe prices in cities will rise more steeply than thought even though Brexit is coming and income stagnation is a factor, suggests that they anticipate a lot of migration into UK cities from other regions of Britain, which is something many people expect to happen. This usually happens either when there is a boom of jobs in industries centred around cities, such as finance, or a dearth of jobs in less urban areas, forcing people to move into cities to look for work and creating more demand for property.
This, in turn, means that what you may be able to deduce, as a trader, from rising house prices in cities and lower inflation outside of them, is that the job situation in Britain is anticipated to become even more reliant on major cities than before. This would mean certain industries would thrive and others would stall, which would affect trade with other countries. All of this can give you some sense of the climate experts expect to see in the UK in the medium term, and this can feed into your sentiments about the pound versus your other currencies.
Of course, this may be more than you really want to think about it, but simply having a sense of what is happening in property can be a very good indicator of other economic factors that can hint at currency directions.