The Centre for Economics and Business Research (Cebr) has issued a very interesting forecast for the UK property market covering the next five years. While on the whole the research is very upbeat it is difficult to understand exactly how any association is able to forecast five years forthwith for a market which is dependent upon what many expect to be sluggish economic growth in the short to medium term. However, we will now take a look at the results of the research and the points discussed by Cebr.
Average house prices in the UK
By the end of 2015 the average house price will be around £263,000 in the UK with further growth of approaching £60,000 expected by 2020, taking the average value of to a staggering £320,000. The growth in property prices across the UK is set to hit 5.6% for 2015, 3.5% for 2016, 4.2% for 2017 and 2018 with 2019 and 2020 also expected to show identical growth of 4.3%. This would take the cost of the UK property up to the £320,000 figure mentioned above.
While it is difficult to argue for and against the above figures, because they take so many volatile elements into account, it was interesting to see that Cebr recently increased its forecast for 2015 from a rise of 4.7% in UK property prices to an impressive 5.6%. This would seem to support the positive outlook in the short term although there are variations across the market.
Climbing the property ladder
Over the last few months we have heard difficulties experienced by first-time buyers with many unable to save for the ever-growing deposits required, not to mention arranging mortgage funding. The Cebr research report also cast a very interesting light on those looking to climb up the property ladder citing research on London flat and terraced home prices. In 2000 the difference between the cost of an average flat in London and an average terraced house was £46,000. This was the cost families were forced to pay when looking for larger properties.
The situation has changed dramatically over the last 15 years with the difference between flat and terraced home properties in London now put at a staggering £176,000. When you bear in mind that fewer people are able to actually climb aboard the property ladder what chance have those on the first rung of moving higher in the future?
Reasons for upward pressure on UK house prices
In many ways it is the same old story with regards to the UK property market and the seemingly ever-increasing upwards pressure. Some of the factors which seem to be feeding this growth in property prices include:-
• Expected further increases in property prices are delaying sales and this is causing further upward pressure.
• The ageing population of the UK has led to a significant increase in older home owners and a collapse in younger homeowners. Figures suggest that those in retirement are less likely to sell their property therefore reducing the number of properties for sale.
• The cost of moving from an average flat in the UK to an average terraced family home has increased dramatically. This means fewer people are likely to upsize their properties reducing activity in the market and again leading to fewer properties for sale.
• While we have mentioned the issue of new builds in the UK, and governments have promised to address this problem, very little progress has been made. There is still a massive shortfall of new builds in the UK which needs to be tackled sooner rather than later.
• The ever-increasing cost of moving, especially stamp duty changes towards the higher end of the market, is not encouraging sellers to act. This reduces the supply of properties and increases demand for the small number actually available – pushing prices yet higher.