Whether you’re a buy-to-let investor, a homeowner or an aspiring first time buyer, it is vital that you’re aware of the goings on in the property market. In the last few years, Britain has developed a housing crisis. So what’s going to happen next?
JLL’s Residential Research team has published its house price forecast for the next five years. It believes that next year, property prices will rise by 5% across the UK. For the next five years, it predicts growth to average between 3-5% per year.
The JLL report states that the strength of the UK economy will help the housing market move forward. It explains: “Improved employment and wage conditions, together with a more prosperous and secure outlook, will instil greater confidence in household finances.”
It says that this will cause more people to be able to buy their first home and encourage existing homeowners to move up the property ladder.
However, it adds that affordability will have a “dampening influence” on price growth and transaction levels. It also states that the Chinese financial crisis could provide an “external threat to the otherwise steady UK economic prognosis”.
Regarding transaction levels in the UK, it claims they will increase steadily from today’s figures, reaching 1.31m by 2019. Although this is an improvement on the last few years, it is still well below the 1.67m recorded in 2006.
“Importantly, construction levels should increase, helped by Government initiatives and a resurgent house building sector,” continues the study.
Although JLL expects construction levels to rise, shortages in the sector, including a lack of labour and materials, could halt progress. However, it predicts that English housing completions will increase to 160,000 per year by 2018, a significant improvement on recent years.
Despite this expected rise in construction, JLL warns: “We continue to build insufficient housing across the UK to meet growing demand, which ultimately leads to higher house prices and a situation where fewer and fewer people can afford to own.”
It points out that the Conservative Government’s recent Housing & Planning Bill is attempting to solve the housing crisis, but “plenty more needs to be done”1.
Additionally, the University of Lancaster has conducted research, titled the UK Housing Observatory, which states that London is on the edge of a housing bubble, which could spread out to the rest of the UK.
The report believes that a housing market bubble in London could burst in 2017.
It states: “Historical evidence suggests that phases of exuberant house prices are often followed by a sudden crash, leaving homebuyers with large mortgages and negative equity.”2
2 http://www.lancaster.ac.uk/lums/economics/research/housing/overview/