How are Lancaster and Morecambe prices linked to GDP growth?

Given the current economic climate, the cost of living increases and a looming recession we thought this week we would take a look at the historic relationship between house prices and GDP growth.

Did you know? The dynamics of the housing market are ultimately determined by the underlying economic performance of the UK. There is a very strong relationship between GDP growth rates and house price growth – this relationship stretches all the way back to the early 1980s. This is clearly illustrated in the graph above.

Many people are now asking what will happen to property prices in Lancaster and Morecambe. Many are hoping that they will continue to increase, especially if the Eden Project gets given the go ahead. There is no doubt about it, it will have a very positive impact, however the larger UK wide and global issues might mean house price growth won’t be as high as some people were hoping! We also have to be aware that property prices in Morecambe have increased by 27.2% in the past 5 years. Wages really do need to catch up for house price growth to continue.

Take a look again at the graph above. If we assume this historic relationship holds true, we can expect house price growth to slow later this year, as GDP growth subsides. Over the last few months there has been a rapid change in the global geopolitical climate and the outlook for the UK economy. UK GDP growth is forecast to be weaker by the end of 2022 and lasting into 2023.

At JDG we are not economists, however the 30 or so economists who contribute to the consensus forecasts compiled by HM Treasury currently believe that GDP growth will slow to 1.3% in 2023. What this does mean is that whilst house price growth over the year to end Q1 was the strongest since 2004, house price growth will likely be lower by the end of 2022.

In a nutshell, house prices aren’t expected to fall in 2022 but expect to see a calmer market as the economy battles a much wider problem.

If you have any questions about the Lancaster and Morecambe Property market, please get in touch. At JDG we are here to help. You can email at michelle@jdg.co.uk or call me on 01524 843322

Thanks for reading

Michelle