UK House Prices Set To Rise
Market analysts have, in recent weeks, produced a raft of predictions for the United Kingdom property market in 2016. Emanating from banks, lenders and industry bodies, these forecasts vary in their minutiae but they agree on one point: house prices, already steeper in Britain than in most other developed countries, will continue to rise during the next twelve months. In this article, we discuss the reasons why experts anticipate further price rises and how potential homeowners will be affected.
Why Are House Prices Expected to Rise Next Year?
The key issue is that the economy is expected to continue growing – a forecast endorsed by both the Office for Budget Responsibility (OBR) and the International Monetary Fund (IMF). This, together with an increasingly fluid jobs market and salary rises, will increase demand for housing. There is, however, no immediate prospect of a corresponding increase in the country’s notoriously limited supply of housing, meaning that prices are almost certain to rise – notably in London and the South East, where housing is already more expensive than elsewhere in the UK.
The government has proposed a series of measures to ease the pressures on housing, including a programme for building affordable homes and Help-to-Buy. But as the Council of Mortgage Lenders (CML) implied in its December 2015 forecast, these initiatives will not be easily achievable and will face a number of political and economic challenges. Accordingly, they won’t solve the housing supply crisis within the next year or two.
How Will the Price Rises Affect First-Time Buyers?
First, it is important to note that these forecasts have caveats relating to geopolitical uncertainty, the referendum on Britain’s membership of the EU and interest-rate changes, which may alter the economic landscape. Assuming, though, that the predictions are correct, the outlook is troubling for first-time buyers. The Sunday Telegraph recently carried an outline of some perplexing Bank of England (BoE) research. This, says the Telegraph, found that many middle-income households are abandoning their ambitions of home ownership owing to inflated house prices and the country’s chronic supply problem. The vast majority of these families expect to remain in tenancies for the rest of their lives.
The Resolution Foundation, a nonpartisan think-tank which works to improve living conditions for workers, especially those on low or middle incomes, has produced research which echoes the BoE study. This shows that around twenty-five per cent of those households which are statistically classified as Britain’s “wealthiest” thought they would never own their own homes. In the second-wealthiest group of households, a third believed they were likely to remain tenants. The possibility of home ownership seems even further away for the poorest households, with more than fifty per cent of this group saying that they were “unlikely” ever to buy. Matthew Whittaker of the Resolution Foundation argued that this was symptomatic of a broader trend in Britain – namely that having a job with a regular income no longer gives rise to the expectation of being able to buy a house, have annual holidays or even invest in a pension.