22nd December 2015
UK house prices are set to rise by 6% over the course of next year, the Royal Institution of Chartered Surveyors has forecast.
The body says that a shortfall in supply would continue to push prices higher and transactions are likely to edge up to between 1.25 and 1.3 million (from 1.22 million in 2015).
It expects house prices to rise across the whole of the UK in 2016 and East Anglia to have the highest rise at 8%. Meanwhile, the North East is likely to see a more modest increase of 3%.
According to RICS, despite the raft of Government 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 twelve 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.
RICS says: “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.”
Jeremy Duncombe, director of Legal & General Mortgage Club, says: “As today’s forecast from RICS indicates, a mixture of limited housing supply and growing demand will continue to push property prices well above inflation in 2016. If this trend continues, without a strong supply-side stimulus, many more aspiring homeowners will find themselves priced out of the market altogether.
“We welcome recent Government commitment to build more affordable housing, which will work to ease pressure on the market. However, other sectors are set for a tough year. Buy-to-let faces a double whammy of the 3% increase in stamp duty and a reduction in tax relief. Negative measures like these will likely cause a rush in demand as prospective landlords rush to complete their transactions before the changes are implemented.
“If we are really to get a grip on the UK housing crisis in 2016, the Government must recognize the pressures on the market across the country and commit itself to an ambitious supply-side house building program by constructing at least 250,000 new homes a year.”