Property Prices in 2016: Predictions

Many property experts have said that some parts of the UK will see an increase of nearly 8% on house prices next year. They have also predicted that the number of homes being sold will go up as well. The 8% increase in house prices will mark a 2% decrease on house price growth for 2015, and there are a huge number of things that could have an impact on the property market as a whole in 2016.

One of the biggest factors that still remain as somewhat of an unknown is the level of interest set by the Bank of England. The governor of the Bank of England, Mark Carney, is yet to set out an exact moment when he believes that the interest rate will be lifted, despite having given various hints throughout the year.

Many of the main market analysts are starting include a small interest rate rise into their forecasts. The Royal Institute of Chartered Surveyors has estimated that there will be a 6% rise in property prices across the whole UK. Simon Rubisohn, their chief economist, stated that he has been making his calculations on the basis of a 0.25% increase in interest rates.

He said:

“If the US rate rises again we might start to see mortgage rates rise, I would imagine that the best value mortgage rates have been around already.”

Rightmove, the property website, are not currently factoring any interest rates change into their predictions. The website is forecasting a 6% increase in house prices for 2016; this would lift the national average by £17,000. Sam Mitchell is a housing analyst at company, he said:

“I don ‘t expect a rate rise until the very end of next year, or maybe even the start of the year after.”

The head of UK residential research at Savills, Lucian Cook, said that he believes that an interest rates rise is likely to slow down the levels of house price growth that we have been seeing in the north of England and the Midlands.

He commented saying:

“I wouldn ‘t expect dramatic house price growth in the Midlands and north next year. As their economies get going, interest rates will start to rise.”

“If interest rates stay lower for longer that gives more capacity for the ripple effect from London over the course of the year.”

His estimation for the Midlands is a price growth of 5%, which is the same level that he foresees for the rest of the UK. However he is predicting growth of just 2.5% and 3% for the north-east and north-west respectively.

It is believed that some buyers will be squeezed quite a bit if the Bank of England decides to lift the base rate of interest; it is likely that many different forms of credit would become more expensive.

When you compare house prices to average incomes in the UK, some parts of the country are witnessing record highs. However, monthly repayments are not as high- relatively speaking.

Cook believes that the rule changes, which were brought into force in April 2014, were still having an effect on the market and meant that we have not seen a return to the number of house purchases that we saw before the financial crisis.

He said:

“I think you are going to get to a situation where people move less often.”

The chief economist for Nationwide, Robert Garner, said that the rate at which new houses were being brought on to the market was not enough to meet the level of demand for people buying homes. He raised this as one the major issues in his forecast for 2016:

“Further healthy gains in employment and rising wages are likely to bolster buyer sentiment, while borrowing costs are expected to rise only gradually,” he said. “However, the main concern is that construction activity will lag behind strengthening demand, putting upward pressure on house prices and eventually reducing affordability.”

Many market analysts said that the rate of house price growth seen outside of London will be higher than that at its centre. East Anglia has been forecast by Rics as the area which will see the highest house price growth next year- at a level of 8%. However Savills believe that the south-east will see the highest growth at 7%, compared with the east at just 6.5%. Rightmove believe that many buyers will turn away from the capital but still expect to see growth levels of around 6%.

Mitchell said:

“We think there might be a flow of people moving their money out of London. We think this might lead to stronger growth in cities like Manchester, Leeds and Liverpool.”

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