House prices to keep soaring with average £40,000 rise in two years
THE value of a typical home will increase nearly £40,000 by the end of next year, experts forecast yesterday.
By: Sarah O'Grady
The value of a typical home will increase by nearly £40,000[PA]
The current price of £254,000 for a three-bedroom semi will soar to £292,437. With a six-year run of record low interest rates likely to continue beyond next year’s general election, demand from buyers will remain high.
This will see values rise by 7.4 per cent this year and 7.2 per cent in 2015 – adding a combined £38,437 to average asking prices.
Economists also dismissed fears of a price bubble in the next 12 months. Alex Gosling, of online estate agents Housesimple.co.uk, said: “Homeowners have never had it so good. For first-time buyers, low interest rates mean there are plenty of cheap deals to entice them in.
And the Government and the Bank of England still have a few more tricks up their sleeves to contain out-of-control price growth if they need to.”
The EY ITEM Club says the Bank of England will keep rates down until the third quarter of next year amid “decent but unspectacular growth”, driven by the continued recovery in consumer spending.
The highly regarded think-tank also dismisses fears of a house price bubble this year because the Financial Conduct Authority will restrain over-enthusiastic borrowers.
It believes toughened mortgage lending rules, which come into force this month, will help to prevent an unsustainable boom as price growth eases to 4.2 per cent in 2016.
Peter Spencer, chief economic adviser to the ITEM Club, said the housing market was not experiencing a typical debt-fuelled recovery.
The FCA will assume crucial importance to ensure multiples do not become too stretched and that affordability is scrupulously checked
He said: “The FCA will assume crucial importance to ensure multiples do not become too stretched and that affordability is scrupulously checked.
“If these controls are rigorously applied this will eventually constrain London prices and head off problems when interest rates rise.”
Stephen Noakes, mortgage director at Halifax, was equally bullish.
He said: “Housing demand continues to be supported by an improving economic outlook, growth in employment, rising consumer confidence, and low interest rates.
“The recent strengthening in house prices is increasing the amount of equity that many homeowners have in their home.
“This will potentially encourage and enable more owners to put their property on the market over the coming year, thereby boosting supply and easing pressure on prices.”
More consumer spending as earnings rise and inflation falls is also set to boost the property market.
Jonathan Harris, director of mortgage broker Anderson Harris, said: “With interest rates not forecast to rise until the third quarter of next year and then slowly once they start to do so, we shouldn’t see tens of thousands of borrowers plunged into financial difficulty.”
Figures from the Office for National Statistics released today are also expected to show strong housing market growth in February.
Paul Smith, chief executive of haart estate agency, which has more than over 200 branches, said: “While undoubtedly buyer demand is acute and the supply of homes limited we do not feel that there is a property bubble developing.”
ITEM, which uses the Treasury’s economic model for its forecasts, also expects business investment to grow 9.1 per cent this year, boosting productivity and wage growth.