UK house prices expected to rise by 'up to 6% in 2016'
12-26-2015
By Press Association
The only way is up for house prices in 2016, according to property experts.
Economists are tipping property values to lift by between 3% to 6% generally across the UK next year, while some regional city hotspots could see stronger price growth.
The continued shortage of homes for buyers to choose from, coupled with strong demand for properties on the back of schemes such as Help to Buy, will keep pushing property values in an upwards direction next year, experts believe.
Economists expect UK house prices to rise by 3% to 6% over the next 12 months
A looming three percentage point stamp duty hike for buy-to-let investors could help get housing market activity off to an early start in 2016, as people rush to beat the deadline.
This could mean aspiring first-time buyers, who often are often looking for properties at the cheaper end of the market which would also appeal to landlords, may increasingly finding themselves competing with investors in the coming weeks.
Office for National Statistics (ONS) figures show that average house prices have already hit a new record high of £287,000 across the UK in October.
Meanwhile, the Royal Institution of Chartered Surveyors (Rics) has reported the supply of new homes on the market falling back to record lows in 2015.
And a recent report compiled by the Centre for Economics and Business Research (Cebr) predicted UK property values will be 50% or around £139,000 higher in 10 years' time than they are now.
Cebr's research, carried out for the National Association of Estate Agents (NAEA) and the Association of Residential Letting Agents (Arla), said that by 2025, the average property price in London could be £931,000.
Richard Donnell, director of research at property analysts Hometrack, expects house prices to increase by around 4% across the UK next year - with particular potential for price growth in vibrant cities outside London with strong jobs sectors, such as Manchester, Leeds, Birmingham and Glasgow.
Property price growth could be around 3% to 4% annually in London next year as affordability there is already particularly stretched - while some big regional cities could see prices increase around twice as fast as this rate, Mr Donnell said, as buyers hunt for value outside the capital.
Simon Rubinsohn, chief economist for Rics, expects house prices to increase by around 6% next year across the UK, while rents will see a 3% annual rise.
He said feedback from Rics' members shows that demand for homes is continuing to outstrip the supply of new properties coming onto surveyors' books.
"It's hard to see prices doing anything other than going up," he told the Press Association.
Property website Rightmove has already seen house sellers hike their asking prices by nearly £20,000 in 2015 across England and Wales across 2015 - and it expects the average price tag on a property to have gone up by a further £17,000 - or 6% - in a year's time.
Rightmove director Miles Shipside said: "Whilst initiatives are in place to encourage developers to build more new homes to supplement the supply of existing ones coming to market, the lead-times are long and developers face capacity constraints.
"In the meantime, strong demand is being further fuelled by the additional momentum and aspiration for home ownership that schemes such as Help to Buy create.
"The additional stamp duty for buy-to-let homes in April next year will add an interesting dynamic to the market and may help give some first-time buyers an edge, but with demand in many areas as high as it is, hoping for a cooling of prices could be wishful thinking."
Robert Gardner, chief economist at Nationwide Building Society, said that f urther healthy gains in employment and rising wages are likely to bolster buyer sentiment next year.
He continued: "However, the main concern is that construction activity will lag behind strengthening demand, putting upward pressure on house prices and eventually reducing affordability.
"Overall, we expect UK house prices to rise by 3% to 6% over the next 12 months."
Mr Gardner said that it is not clear if house price growth in London and the South will continue to outstrip the rest of the country.
He said: "Prices in the South of England, and especially in London, have been outpacing the rest of the UK by a wide margin. Indeed, prices in the South of England are now well above their pre-crisis levels while they remain below in Scotland, Wales and large parts of the North of England.
"With affordability metrics in the capital stretched by historic standards, another year of above-average price gains appears unlikely - though in truth, we held a similar view at the end of 2014."
Halifax's housing economist Martin Ellis expects house prices to be rising by 4 to 6% annually by the end of 2016.
He said the "substantial imbalance between demand and supply is likely to persist, maintaining upward pressure on house prices in 2016".
Looking beyond 2016, Mr Ellis expects house price to fall more broadly into line with income growth, as the prospect of steady interest rate rises will place further restrictions on what people can afford to pay for a home, as home owners will see their mortgage costs go up.
Much of what happens in the housing market will depend on exactly when any interest rate rises start to kick in. Lenders have been offering some of their cheapest ever mortgage rates this year, as the Bank of England's base rate has remained at a historic 0.5%.
The Council of Mortgage Lenders (CML) has said that it expects interest rates to start rising during the second half of 2016 and that the majority of borrowers will cope with rate rises.
The Bank of England has indicated that any interest rate rises will be small and gradual, helping to make sure that borrowers are not tipped over the edge by the higher costs.