- Housing supply is drying up and causing price pressure
- Property prices are predicted to rise 2.5% during 2015, RICS predicts
- Northern Ireland will see the strongest value growth
A shortage of property for sale is adding to pressure on house prices, despite a recent slowdown in activity and the London property market coming off the boil. The latest Royal Institution of Chartered Surveyors property report forecasts house prices to rise 2.5 per cent over the course of 2015 and then increase by 4.5 per cent each year for the next five years.
Simon Robinson of RICS said: ‘The boost that was given to the housing market by the Help to Buy scheme has begun to dissipate and activity levels have slipped back.
‘Even more worrying are the tentative signs that price momentum could be set to pick up once again as the supply of stock to the market continues to fall.
‘Anecdotal evidence does suggest that election uncertainty may be having some impact on the market, but underlying the trends visible in the latest survey is a very real housing crisis which will urgently need to be addressed by the next government’.
A balance of 70 per cent more RICS members surveyed forecast house prices to rise rather than fall in coming months. They are forecast to fall in London and Wales, however, albeit with only a small majority of members forecasting a decline. The report showed property prices rising across most of the UK in the three months to March. They fell in two areas, however, London and the North.
The RICS report arrives as housing has been put centre stage in the election debate. The Conservative party has promised to extend Right-to-Buy to Housing association tenants, as well as local authority homes, and take homes worth up to £1million out of the inheritance tax trap.
All political parties are pledging to increase homebuilding, although figures show that while private developer building is below its long-term average, it is an almost complete lack of local authority housebuilding that has stood behind Britain’s shortage of new homes.
RICS said that a balance of 21 per cent more surveyors reported seeing house prices increasing rather than decreasing in March, up from a balance of 15 per cent in February.
Last month in London a decline in the number of prospective buyers saw queries and the number of agreed sales fall for the eleventh consecutive month, while 24 per cent of surveyors reported a drop in the number of new properties coming onto the market.
The upcoming election and recent stamp duty changes are creating a more ‘volatile’ housing market according to RICS.
Scotland and Northern Ireland are the only areas to have seen consistent growth in housing market demand over the past six months.
Jeremy Blackburn of RICS said: ‘The Conservative Party’s proposal this week to extend Right-To-Buy will help relatively small numbers of tenants to move into home ownership, without doing anything to solve the shortage in overall housing supply.
‘Aspirational home ownership is at the core of our economy but we must ensure that we have a future stock across all tenures and particularly for those on lower incomes’.
In the lettings market, tenant demand continues to outpace supply and 26 per cent of surveyors expect rental values to increase over the next three months.
RICS said: ‘Expectations for rental growth remain almost unchanged versus the previous month with respondents anticipating growth of 2.7 per cent over the year to come and growth accelerating therefater to an average of 4.7 per cent per annum over the coming five years’.
Meanwhile, the deposits being put down by first-time buyers were perceived by surveyors to be lower in the first few months of this year, compared with the final three months of 2014, RICS said.
Earlier this month, the Bank of England’s latest Credit Conditions Survey found that banks and building societies have become more willing to lend to people with deposits below 10 per cent. Lenders said they expect to see an increase in the proportion of home loan applications being approved in the next three months.
Earlier in the week, the Office for National Statistics said house prices in the UK increased by 7.2 per cent in the 12 months to February 2015, suggesting that the housing market is slowing. In the previous month, property values had grown 8.4 per cent annually. There has been a slow decline in yearly house price growth since the index peaked at 12.1 per cent in September.
A large driver of the slowdown has been recent weakness in London. The index showed house prices still 9.4 per cent higher in London than a year ago, but this is the weakest annual rise for some time.