UK property prices forecast to rise by 4% in 2015

While some experts believe that UK property prices could rise by as much as 7.4% in 2015 the general consensus seems to be growth of 4% during the next 12 months. This is certainly a dramatic reduction from the 11% trend seen in June 2014 although there are a number of underlying factors which may well impact the market over the next year.

It is also worth noting that while the 4% average increase in UK property prices is higher than inflation and a rise in real terms, the variations across the country could be enormous. During 2014 we saw double-digit growth in London while Wales managed just over 1% growth. So, which factors will be impacting the UK property market in the short to medium term?

The election

The forthcoming general election will have an impact on the UK property market with some investors holding back to see the form of the next government. Alternatively, as we have seen in recent weeks, the current government is very keen to support the UK property market in the short to medium term and will likely use this as an argument for re-election. However, the general consensus seems to be that the first few months of 2015 will be dominated by the election and this could lead to a lacklustre UK real estate market.

Quote from PropertyForum.com: “There is concern for the UK property market in the short to medium term after the Bank of England confirmed that mortgage approvals in November hit an 18 month low.”

Surprisingly, history shows that the government of the day in recent times has had a limited impact upon the medium to long term performance of the UK property market. Aside from a bit of tinkering at the edges all governments seem determined to support the UK property market in the longer term whether by financial incentives or by limiting the number of new builds.

UK base rates

The Bank of England suggested on numerous occasions during 2014 that base rates were on the verge of increasing and this would have an impact on the UK property market. The situation at the moment, with UK base rates at a record low of 0.5%, seems to be that base rates could maintain this level during the bulk of 2015. If the property market were to move forward again then we might see a slight increase in base rates but it will take many years to get back towards the levels seen prior to the worldwide economic crisis.

In many ways cheap finance is funding the UK property market, and other investment markets, but there will be a significant impact as and when UK base rates increase. Whether those looking to invest in the UK property market at this moment in time have considered an increase in base rates in the medium term is certainly debatable.

The Euro crisis

While the UK government at the time was criticised for not taking on the Euro this seems to have been a masterstroke when you bear in mind the ongoing crisis within Europe and concerns about the long-term future of the Euro itself. There are major worries that the Greek government is on the verge of pulling out of the EU and ditching the Euro as the general public vent their anger at the ongoing economic demise of the country. However, while it is easy to blame the Euro and the European Union for the ongoing issues experienced in Greece, the fact remains that the Greek tax system was and still is a shambles.

Whatever happens over the next 12 months it looks likely to be a very volatile year for property!