UK House Prices Predicted to Rise by 50%

UK House Prices Predicted to Rise by 50%

Clock  3 minute read

Carl Shave Carl Shave | December 23, 2015


Facebook Twitter

Here’s some Christmas cheer for first-time buyers… UK house prices fell by 0.2% last month and we’re in the midst of record low-interest rates, hurrah! But… Before potential homebuyers pop the champagne corks and rush out to secure a mortgage, they should read on… Demand stimulated in no small part by falls in already very low mortgage rates (the lowest since 2007), is increasingly outstripping supply, which is at a record low. This means, despite November’s brief dip, house prices will continue to rise dramatically over the coming years and the lack of affordable housing will persist.

Can We Trust the Predictions?

The Halifax reported a 9% increase in average house prices this year and the Royal Institution of Chartered Surveyors (RICS) predict a rise of 4.5% per annum over the next 5 years. The National Association of Estate Agents (NAEA) recently published a report predicting property prices will rise by 50% within the next decade. Worse still, London house prices are predicted to almost double over the same period! The average UK house price is expected to rise from the current £280,000 to £419,000 by 2025. London prices will increase from an already unattainable-for-most £531,000 to a gargantuan £931,000! NAEA’s house price research is corroborated by similar figures published by the Office for National Statistics and falls neatly in line with the cumulative increase of 25% (over 5 years) predicted by RICS.

What Effect Will This Have on the Property Market?

As current statistics show, property prices continue to rise as demand outstrips supply. As usual, London house prices lead the way with the estimated increases, however, the trend certainly appears to be relatively nationwide. The question perhaps is, will affordability enable the forecast rises to materialise? The ongoing demand and supply situation will inevitably continue and will be a source of differences in opinion for many years to come, but ultimately, property prices can only rise to a level that buyers can afford. With regard to residential purchases, incomes will need to be at a level that ensures mortgages are obtainable and tightened affordability criteria from lenders will also control the market. Buy to Let investors will also be reviewing their potential purchases as the changes in tax rulings start to impose themselves. Measures to control the continuing house price rises have already been implemented by the Bank of England and the government, and others will undoubtedly be considered should the market necessitate. The demand and supply issue will always ensure that property prices should, if nothing more, provoke a healthy debate on where property prices can and will go.

Getting a Mortgage Vs. Renting

Owning a home might already seem out of reach to most people, but the Association of Rental Letting Agents are warning that rental costs are also expected to rise considerably. This will make it far more difficult for aspiring house buyers to save the all-important deposit, especially when you factor in low wage inflation. The third quarter of 2015 saw a significant increase in mortgage activity due to the low base rate and increased lender competition, but these attractive borrowing rates won’t be around forever. You might be feeling priced out of the market, but with ongoing house price inflation, now is the time to contact our expert mortgage advisers to discuss the best option for you. Call us today! Image source