Pre­dic­tions for new year mar­ket

Rutherglen Reformer - - Property - Lor­raine Howard

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.”

Newspapers in English

Newspapers from UK

© PressReader. All rights reserved.