House prices in the UK are still at almost prohibitive levels, but they are expected to drop as 2015 takes hold. According to the Centre for Economics and Business Research (CEBR), the average house price dropped to £271,000 in October last year, and is expected to drop even more as a number of new voter-friendly buying policies come into effect.
London’s property prices, which have experienced record growth since 2010, will be among the first to begin the reverse trend, and will slip by downwards of 3.3 per cent, according to the CEBR. The CEBR said the threat of higher interest rates, greater supply and fewer foreign buyers, and the upcoming general election in May will put the market into reverse.
The CEBR predicts that house prices in the UK in general will fall by 0.6% in the year ahead. The latest data is based on fewer buyer inquiries and properties taking longer to sell. Despite the elements of political and taxation uncertainties as factors before the general election, the CEBR does not expect a strong post-election bounce back.
A recent survey by the Bank of England showed a marked decline in the demand for mortgages during the final quarter of 2014. Mortgage approvals for house purchases dropped from 59, 511 in October to 59,029 during November 2014, and are 22.9 per cent below the January 2014 figure of 76,611. The decline in demand is at its lowest since the third quarter of 2008, and there has also been a marked decline in buy-to-let lending, which appears to be the foundation stone of the emerging pattern of falling property prices.
In contrast to the CEBR’s predictions, Halifax expects prices to rise upwards of 3 percent, once the pre-election jitters are settled. The Royal Institution of Chartered Surveyors predicts a 3 per cent growth across the UK, with prices in London remaining flat. In addition to stamp duty reform, elevated consumer confidence, and high and rising employment another contributing factor to price increase predictions is the government’s plan to build 100,00 new homes on under-used or unviable brownfield land. Buyers of these new homes are set to receive a minimum 20 per cent discount, which is likely to trigger an upswing in the market.
The contrasting predictions make it abundantly clear that the direction the housing market will take during 2015 depends on consumer confidence, which in turn depends on the direction the economy takes. Is the pattern of strong growth established as the norm for the UK, or will it begin to reverse, and as a potential home buyer, or seller, should you wait and watch, or just bite the bullet and buy or sell now? This is the million dollar question which taps into the idea of consumer confidence, which, if strong, could send housing prices upwards, along the pattern established since 2010.