• Housing market confidence is closely tied to the state of the economy and strong employment and rising wages would normally support a confident housing market.
• However, in the year to June 2019, while weekly earnings rose to 3.6%, house prices increased by just 0.9% over the same period, demonstrating the breakdown in the relationship between earnings and house price growth.
• Therefore we currently have quite an unusual circumstance. Both the employment rate and wages are rising, yet Gross Domestic Product, a measure of the nation’s economic activity, has weakened, recording a fall for the second quarter and is expected to fall further.
• So what does this mean for the residential market? Historically we have seen that slower house price growth alongside a strong rise in earnings, has helped improve affordability for homes.