UK house prices are forecast to rise by 25% over the next five years and become “ever more unaffordable”, largely because of an acute shortage of homes for sale, a leading property body has warned.
The Royal Institution of Chartered Surveyors (Rics) said the supply of homes for sale – as measured by the average number on a chartered surveyor estate agent’s books – had fallen to its lowest level since records began in January 1978. It added that an anticipated post-general election “supply bounce” had failed to materialise, with the north-west and London seeing the sharpest drop in instructions compared with April.
The average stock of houses per surveyor now stands at 52, down by around 12% since the start of 2015. At the same time, new buyer inquiries increased at their fastest rate in more than a year. As a result, house prices rose again in May, and at a quicker pace than in April, said Rics.
Several economists have already suggested that prices will start to rise again now that a majority Conservative government is in place. Earlier this month, Steven Bell, chief economist at City fund manager F&C Investments, said boom conditions had returned to the housing market.
Meanwhile, the Halifax’s housing economist, Martin Ellis, last week warned that housing supply “remains extremely tight”. “The imbalance between supply and demand is likely to continue to push up house prices over the coming months.” The Halifax and Nationwide building society both put the average price of a UK home at £195,000-£196,000.
Simon Rubinsohn, chief economist at Rics, said: “There had been some hope that the removal of political uncertainty would encourage more properties on to the market, but the initial indications are that this is not proving to be the case. As a result, it is hardly surprising that prices across much of the country are continuing to be squeezed higher, with property set to become ever more unaffordable.”
He added that the feedback Rics was receiving from its members “points to prices at a headline level rising by another 25% over the next five years”. He said that suggested there was no real confidence among its members that effective measures to provide a major boost to new supply would be delivered by the government any time soon.
One chartered surveyor, the Frost Partnership in Ashford, Surrey, told Rics: “Listings are in very short supply, which is pushing up asking prices to unrealistic levels in some cases.”
Meanwhile, Christopher Green at Curzon Land in central London, which specialises in “prime property investments”, was clearly cheered by the election result, telling Rics that “the market has gained an immense amount of optimism now that the socialist spectre has been removed for the next five years”.
The bad news for tenants – on top of many people being unable to buy because of high prices – is that Rics members are also predicting rent rises averaging almost 3% over the next 12 months. The body said this reflected the fact that demand for rental properties was continuing to increase. “Contributors [to the survey] anticipate that rents will rise across all parts of the UK over the next three months, with expectations most elevated in the East Midlands and the south-west,” it added.