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House prices in the UK will rise by six per cent next year, despite Government measures supposedly intended to alleviate the housing crisis according to a new forecast.
The annual housing market forecast for 2016 from the Royal Institute of Chartered Surveyors’ (RICS) also found that London property was predicted to increase in value by 5 per cent during 2016.
Ham & High reports that The Office for Budget Responsibility had predicted that UK house prices would rise five per cent year-on-year until 2020.
This forecast was cited in the Treasury blue book in which George Osborne’s Autumn Statement plan to build 400,000 homes in the private sector was announced.
RICS, which is the professional body for the land, property and construction sectors, blames supply problems for the likely increase in prices in 2016, saying it will outstrip any rise in household income.
It also points to a drop in new instructions and a resurgence in new buyer enquiries as factors contributing to this increased imbalance and subsequent price hike.
The projected six per cent rise in 2016 also trumps last year’s climb, which the government’s Land Registry House Price Index put at 5.6 per cent in the 12 months preceding October of this year.
Simon Rubinsohn, RICS’s chief economist, said:
“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. Looking further out, there is some justification for taking a more optimistic view of new build with significant incentives being put in place to deliver starter homes. While this may not on its own stem the upward trend in house prices, it could help to slow the rate of growth to something closer to the probable rise in household incomes.
Critically our principal concern with the measures announced by the Government is that they are overly focused on promoting home ownership 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 going forward.”
A Department for Communities and Local Government spokesman said: “We want to ensure anyone who aspires to own their own home has the opportunity to do so.
“Government recently announced the biggest, boldest and most ambitious plan for housing in a generation with a doubling of the housing budget. Our initiatives have helped nearly 270,000 people to buy since 2010 and we are delivering 200,000 new starter homes, which will offer a 20 per cent discount to first-time buyers. On top of this the number of new homes is up 25 per cent in the last year.”
Karen James, Head of Residential Conveyancing at Ramsdens commented: "Anecdotal evidence from our estate agency contacts show that stock levels are at an all time low. The simple laws of supply and demand means that if this situation doesn’t change, house prices are likely to increase at a higher rate than 2015, which the Nationwide Building Society sets at some 7% over the course of 2015. There is a general upbeat feeling within the industry and with regard to the economy in general. People have confidence in their employment and wages are rising, and the costs of borrowing remain at an all time low and are likely to continue to do so, which encourages buyers. However, the main concern is that construction activity will lag behind strengthening demand, putting upward pressure on house prices and eventually reducing affordability."