House price predictions 2015

2014 review

The UK housing market saw a spring and summer boom in 2014, particularly in London and the South of England (us!), before activity dropped away a little towards the end of the year although this tends to be normal around Christmas.

The variance of polled opinion

Recently published figures from the Nationwide Building Society - the first to record the annual change over the whole of 2014 - suggest that UK house prices rose 7.2% during the year. You may recall I posted a 4.2% annual increase in the South East. The regional differences are fairly interesting though with London reporting a 17.8% increase, yet Wales showing a 1.4% increase. Differences indeed.

Another survey, by rival lender the Halifax, says that prices rose by 8.5% over the year, although its official house price index data has not yet been published.

Strange as it may sound the rise in prices and activity is reflected in the number of people buying carpets. Wilf Walsh, chief executive of Carpetright, says that the outlook is "mixed", but there are signals of pent-up demand being released.

Ian James, president of the National Institute of Carpet and Floorlayers, says that business is "still a bit slow in the North East" of England, but has been picking up elsewhere.
"The last five years have been pretty poor," he says, explaining that many fitters could not find enough work from independent carpet retailers.

"But we can see the shoots of recovery. We had our biggest trade show in years. There is a trend of [consumers] going back to carpet instead of cheaper laminate flooring."

 
UK housing market saw more activity in 2014 than at any time since 2007
 

As may be expected, these home improvements are lagging slightly behind transaction levels in the housing market, with buyers perhaps waiting a few months in their new home before spending more on laying new carpets.

House sales were consistently above 100,000 a month in 2014 across the UK, according to seasonally adjusted figures from HM revenue and customs. It is the first time this has been the case since 2007 which was of course the last significant property boom.

Year ahead

Activity levels are likely to be positive in 2015 but it is anticipated that the growth will be steady rather than sky rocketing.

The general election is likely to dampen activity in the housing market until the result is known, but that recent changes to stamp duty may have little effect. It is also suggested that the Bank rate - a key factor in determining the level of mortgage interest rates - could end the year at the current, record low level of 0.5%.

London property prices can have a significant effect on the UK average
 

This London lag is most striking in the predictions of the Royal Institution of Chartered Surveyors (RICS).

RICS, and its global residential director Peter Bolton King, say that house prices in London will be unchanged in 2015 compared with 2014. This will restrict UK house price growth to 3% in the year to come, or so they say.

Ed Stansfield, property economist at Capital Economics, says that his prediction of a slowdown in prices in London is partly the result of buyers simply saying "enough is enough" with homes in the capital either overpriced or unaffordable.

Miles Shipside, director of internet property portal Rightmove, says that this will lead to prices picking up further out from London in the South East of England as families look for more affordable homes within commuting distance of the city. A very positive sign for us Oxford folk I am sure you would agree especially when you consider that alot of 'Oxford residents' reguarly commute out to our major cities, most notably London.

Another significant factor in determining housing market activity in 2015 is the level of wage rises.
Martin Ellis, housing economist for the Halifax, says that the first year of consistent above-inflation wage growth for some time could add to demand for homes. However, he too points to the potential effect of the general election and the threat of rising interest rates as keeping that demand in check.
Predictions can always be thrown out by unexpected events, and longer-term estimates must be treated with even more care.

Still, estate agent Savills has predicted that over the next few years house prices will rise no faster than 5% per annum.

It is predicting UK property price growth of 2% in 2015, 5% in 2016, 5% in 2017, 3% in 2018 and 3% in 2019.

Personally I try not to look too far ahead. There are many things that happen during the course of the year that can have a positive or negative effect on the housing market and whilst predictions are never too far away they can never be wholly accurate.

What do you think?

Call me for more.

Best regards

Richard