Predictions for new year market
This week we take a look at the housing market predictions for 2016 with Halifax’s housing economist, Martin Ellis who shares his predictions for the year ahead.
He said: “There is little reason to expect any fundamental shift in the key market drivers in the immediate future. As a result, the substantial imbalance between supply and demand is likely to persist, maintaining upward pressure on house prices in 2016. On average, UK house prices look expensive compared to incomes but valuations are supported by the low levels of property for sale, low levels of housebuilding, and exceptionally low interest rates. Nonetheless, with house prices continuing to increase more quickly than average earnings, it is increasingly difficult to get on the housing ladder. This ongoing development, combined with the growing prospect of an interest rate rise, should start to put the brakes on house price growth during the course of 2016.
Growth: “House price growth has been robust throughout 2015. The quarterly rate of increase was 2.8 per cent in October, according to the latest figures; a little above the 2.5 per cent average over the first nine months of the year. The annual rate1 stood at 9.7 per cent in October – the highest annual rate since August 2014 (9.7 per cent) – with the annual rate in a narrow band between 8 per cent and 10 per cent all year.
“Improving economic conditions – continuing growth and rising employment – and strengthening household finances, assisted by increasing real earnings for the first time for several years, have boosted housing demand during 2015. This has been supported further by very low mortgage rates which have fallen over the year. Strengthening demand has combined with very low supply – both in terms of new build and second-hand properties for sale – to drive strong underlying house price growth. New instructions2 by home sellers declined in October for the ninth successive month. This contributed to the stock of homes2 available for sale falling to a new record low.”
Medium-Term Outlook: “A number of important factors will affect house price growth beyond 2016. Increases in Bank Base Rate are expected to contribute to a slowing in the pace of house price growth over the medium-term.
“Gradual rate rises and increasing incomes should nonetheless keep mortgage p ayment affordability manageable for the overwhelming majority.
“Levels of housebuilding remain well below those required to keep up with the pace of household formation, but we do expect improvements over the medium-term.
“An upward t rend in housebuilding would help to bring demand and supply into better balance, helping to constrain upward pressure on house prices.
“A greater focus on house price stability by policymakers should also help to prevent a future buildup of mortgage debt threatening financial stability and assist in curbing house price growth over the medium and longer-terms.
“House price growth is expected to be broadly in line with income growth beyond 2016 as steadily rising interest rates increase the affordability constraint on the market.”