A shortage of housing supply will continue to push up property prices next year, according to the latest report from the Royal Institution of Chartered Surveyors (RICS).
The body predicts an average 6% increase in house prices and a modest rise in sales activity.
Shortage of Supply Will Continue Pushing Up Prices, Says RICS
It states that next year’s growth in prices will outstrip any rise in household incomes.
The report says: “One theme has dominated the private housing market this year – the dramatic fall in inventory on the books of estate agents.”
It expects the greatest price rises to be in East Anglia in 2016 at 8%, followed by the South East and West Midlands at 7%.
The North West, Wales, and Yorkshire and the Humberside will see prices rise by 6%, believes the RICS, with 5% increases in London, Northern Ireland and the South West, 4% in the East Midlands and Scotland, and 3% in the North East.
Chief Economist at the RICS, Simon Rubinsohn, comments: “Housing has clearly leapt up the Government’s agenda, but despite the raft of initiatives announced over the past year, the lags involved in development mean that prices, and for that matter rents, are likely to rise further over the next 12 months.
“Lack of stock will continue to be the principal driver of this trend, but the likely persistence of cheap money will compound it for the time being.”
He continues: “Critically, our principal concern with the measures announced by the Government is that they are overly focused on promoting homeownership at the expense of other tenures.
“Discouraging buy-to-let could see private rents take even more of the strain if institutional investment doesn’t increase significantly, particularly given the likely reduced flows of social rent property.”1
Separately, Marsh & Parsons’ Peter Rollings forecasts a 3% increase for house prices in prime central London, but 5% on the fringes of the capital.
The estate agent reports that sales of expensive homes have been greatly affected by last year’s Stamp Duty changes, which saw a top rate of 12% introduced.
Sales of properties worth more than £937,000 – the threshold for higher Stamp Duty charges – have dropped substantially.
The firm warns that next year, vendors of prime property must revise their price expectations.
Rollings adds: “The Stamp Duty changes have certainly dulled the London housing market, and while 2016 will see a return to growth, it will be rather lacklustre.”2
However, he expects high demand to continue outstripping supply and believes that in the broader London market, the only way for house prices is up.
1 http://www.rics.org/uk/news/news-insight/comment/uk-house-prices-to-rise-by-6-percent-in-2016/