House price predictions 2015: what next for property?
House prices rose much faster than predicted this year, but now the pace has slowed. What is being forecast for 2015?
An influx of foreign money also continued to support the top-end of the market.
London and the South East recorded double digit annual rises in July – 10pc according to Halifax – and all regions across the UK experienced a rate of growth not seen since before the financial crisis.
The price rises have slowed in the second half of the year, but the average annual rise in November was still 8.2pc, according to Halifax, which put the average house price at £186,941.
While we don't yet know what the annual price rise for 2014 was overall, it is likely to be significantly higher than most commentators expected 12 months ago.
The Office for Budget Responsibility had predicted house prices would rise by 5.2pc in 2014.
Halifax said house prices would rise by between 4pc and 8pc this year, while estate agents Savills and Knight Frank predicted rises of 6.5pc and 7pc respectively.
So what do industry commentators expect will happen in 2015? Here we look at the predictions so far.
Office for Budget Responsibility
The Treasury forecaster has revised up its earlier forecast for price growth over the next five years. It now expects prices will rise by 7.4pc in 2015, 5.9pc in 2016, 5.8pc in 2017, 5.1pc in 2018 and 3.8pc in 2019.
It said: “In total, house prices are expected to rise by 31.4pc by the first quarter of 2020."
But once inflation is factored in, the increase will be far more modest: "Relative to their pre-crisis peaks in 2007, real house prices at the end of the forecast would be 8.8pc higher and the ratio of house prices to average earnings 9.5pc higher.”
Royal Institution of Chartered Surveyors (Rics)
Rics expects all parts of the UK to see modest price rises during 2015, at an average rate of 3pc. It said the North West, South East, West Midlands and Yorkshire and Humberside will see the largest rises at 5pc, while in London prices will be stagnant.
It said having outperformed in the early stages of the recovery, London’s housing market was “pausing for breath” both in terms of pricing and activity.
Property economist Matthew Pointon said demand and supply will be broadly in balance, so house price gains will drift down towards zero over the next few months. He added several regions could see some modest falls in the new year.
But he does not expect sustained house price falls in any region thanks to record low mortgage rates, rising wages and early signs that lenders are starting to increase the availability of loans.
IHS Global Insight
Howard Archer, chief UK and European economist, said he expects house prices to rise by “a solid but unspectacular 5pc” in 2015 after a modest overall increase at the end of this year.
He said price rises will be driven by the recent reforms to stamp duty, which will cut the tax for the majority of buyers, high and rising employment,
earnings growth and low mortgage rates.
However it will be kept in check by stretched house-prices-to-earnings ratios, strict lending criteria imposed on borrowers and the prospect that interest rates will eventually start to rise in 2015.
The lender expects house prices nationally to increase by between 3 and 5pc in 2015, after house price inflation peaked at around 10pc in July this year.
It also said supply and demand will be better balanced than it was earlier this year.
“The prospect of higher interest rates at some point in the year and reduced affordability are expected to be key factors curbing housing demand," it said. "A looming general election next May could also raise uncertainty, resulting in a lull in activity in the early months of the year.”
The estate agent expects house prices to rise by 2pc on average across the UK, with Scotland seeing the highest growth at 3.5pc.
It said that after a period of very strong house price growth, affordability constraints and mortgage regulation have begun to slow the rate of growth and these factors, combined with interest rate rises, will cap the potential for further growth.
“London, having experienced the strongest price growth, will be most affected and so we are predicting prices will flatline next year, with five-year price growth totalling just 10.4pc, the lowest of any region."
Knight Frank expects higher average UK house price growth at 3.5pc in 2015, but also believes prime London will remain flat before rising 4.5pc in 2016.
"We remain of the view that pricing in the UK is high in historic terms and affordability constraints will limit future price growth, especially as we move into a more normal period for price growth," it said.
What do you think?
Consumer confidence in house prices has fallen to its lowest level since June 2013, according to this month's Housing Market Confidence Tracker from Halifax.
Of those surveyed, a net balance of +25 (the proportion of respondents who feel the next 12 months will be a good time to buy minus those who think it will be a bad time) now believe the next 12 months will be a good time to buy – an increase of 14 points since September 2014.
In contrast, selling sentiment has fallen to a net balance of +14, a drop of 5 points since September 2014.
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