In the final quarter of 2015, let’s take a moment to look at the state of the housing market. The price of houses in the UK has become a national obsession and is being used as a key figure in the state of the UK’s consumer economy. For this reason, it is important to stay ahead of the curve and understand what’s happening and which predictions are coming true.
Prices Rise Higher Than Predicted
The Centre for Economics and Business Research initially predicted that property prices would rise by a rather modest 1.5% in 2015, however this has been greatly overachieved. A revision of this prediction instead gave a figure of 4.7% increase – that’s triple the previous estimate. One of the main reasons behind this increase is Britain’s housing crisis, which is seeing the demand for houses being greater than the supply.
Housing Crisis Continues
Continuing on the housing crisis, housebuilding is still behind population growth and property demand. There are many steps that the government is taking in order to make it easier for housebuilders to create properties, thus encouraging new developments, although we are unlikely to see the impact of this in the immediate future.
Impact of New Stamp Duty
The new stamp duty rules, brought in at the beginning of 2015, have had a positive impact across the majority of the market. However, there has been a negative result seen in properties that are being sold in the £925,000 to £1.5m and £1.5m+ brackets. This type of property saw a nationwide drop of 9% and a 16% drop in London alone over the last year.
0.5% Interest Rate Coming to an End?
The UK’s interest rates have been flat lined for over 6 years as a panic measure. However many indicators have suggested that we are no longer in a state of financial emergency, in fact 2015 has shown the fastest real pay increase since 2008. While nothing specific has been said in regards to when the interest rates will go up, most economists don’t expect this change to happen in the near future.
Harder Times for First Time Buyers
In a single year, first time buyers have lost out drastically with asking prices being almost 10% higher than they were the previous year. Property website, Rightmove, has argued that the reason for this is the increased demand from buy-to-let investors and reduced number of first-time properties up for sale. While the entire market has seen real growth of 5.6%, typical first-time-buyer homes has seen a whopping 9.6% in just 12 months.
Buying is Cheaper than Renting
Property website, Zoopla, has data which found that paying a 90% mortgage on a typical two-bed house works out cheaper than renting in a third of the UK’s towns and cities. This is largely a result of increasing rental figures, which are seeing tenants paying up to 4.5% more year-on-year. While there are significant additional costs to owning a home, the difference in monthly payments can make it more cost effective to buy in some areas of the UK.
