Despite what is arguably the worst recession since the 1920’s, leading experts appear buoyant about the prospects for the UK property market. The January 2015 report from Nationwide showed that there had already been a year-on-year house price rise of 8.6%. The average house price currently stands at £163,481 and is expected to continue this upward trend. Unless property experiences a surprise fall this February, house price inflation could exceed 10% for the first time since May 2012.
Latest House Price Forecast
The Centre for Economics and Business Research (CEBR) has predicted that the average house price will reach its previous 2012 high of £198,000 by 2017. According to Nationwide, unless property experiences a surprise fall in February 2015, house price inflation could exceed 10% for the first time since May 2012.
Reasons for the House Price Rise
- Supply shortage. Many homeowners are reluctant or unable to sell until the average house price rises further. This has led to a shortage of stock relative to the current demand in some areas.
- Access to lending. The CEBR believes that the banks are now more willing to lend money. At its low, just 33,000 mortgages were approved by lenders. Although 60,000 home mortgages are currently being approved, this figure is expected to grow to 72,000 by the end of 2015.
Is an Increase to the Average House Price Sustainable?
Despite the UK economy ’emerging’ from its recession in the fourth quarter of 2014, the fundamentals remain extremely shaky. Unemployment currently stands at 7.8% (and many people still aren’t claiming benefit) so conditions remain difficult. According to the Council of Mortgage Lenders (CML), 194,000 homeowners have mortgage arrears that exceeds 2.5% of their homes value. Not surprisingly, property repossession is also at a 14-year high. These figures could destabilise any continued recovery.
Caution on the Latest House Price Predictions
Whilst prospective buyers turn to the experts to determine when a house price rise will take place, it is important to appreciate that many professionals have already revised their expectations on several occasions. Critics argue that the experts have a vested interest in the recovery of the property market and may be creating false hope. The risk of a further decline in house prices is very real so the only sensible piece of advice to first-time buyers is to purchase a home to live in for the medium term and not as a short term investment.