House Prices to Rise by Another 5% in 2015
House prices could increase by almost 5% over the rest of the year, as property values are being driven by a shortage of homes on the market, according to an economic think tank.
The Centre for Economics and Business Research (Cebr) has tripled its property price predictions for 2015, from 1.5% to 4.7%.
The organisation says that a “chronic lack of properties being put up for sale” has pushed prices up in the last few months, which has caused this revision.
House Prices to Rise by Another 5% in 2015
If its forecast is correct, the average UK home will be worth a record £249,000 at the end of 2015.
Cebr says that although the London housing market was a key factor in overall growth in 2014, it expects the capital to underperform the rest of the country this year, with prices predicted to increase by just 3.7%.
It says that despite the Conservative’s general election win removing the threat of a mansion tax, the prime London market has been affected by last year’s Stamp Duty reform.
As the amount of new homes being built is continuing to fall behind the level needed to keep pace with housing demand, Cebr predicts that house prices will rise by a further 3.4% in 2016 and 4.4% in 2017.
Cebr expects the average house price to be £307,600 by the end of the current Parliament in 2020. This would be a 23.6% increase.
It also says that although the Bank of England (BoE) is planning to increase interest rates at the end of this year, the cost of borrowing will rise gradually and settle at around 2%, still much lower than before the recession.
The combination of a lack of supply, earnings growth and low interest rates is expected to support house prices.
Cebr economist, Nina Skero, says: “With the possibility of higher taxation on prime property and intervention in the rental market less likely, the Conservative Party’s victory in the general election will likely support stronger price growth in the second half of 2015.
“Prices will also see a boost from the lack of fresh properties coming on the market.
“In London, average house prices are being weighed down by the prime end of the market. A strong pound, which makes London property less affordable for foreign buyers, and December’s decision to increase Stamp Duty on properties valued above £1.1m are both deterring some prospective buyers.”1
The current average house price is £270,702, according to Zoopla.