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UK Property Market Predictions For 2015

UK Property Market Predictions For 2015

What Will Happen To
The UK Property Market In 2015?

Happy New Year to all our readers, and welcome to the usual confusion over what the year ahead will bring for the UK property market.

Property prices are still predicted to rise in 2015, albeit at a much slower pace than in 2014, with economists and property experts providing forecasts ranging from 3% to 5% property price growth.

However, there are a few events that might affect the UK property market in 2015, namely the general election that will be held in May and the growing probability of Bank of England (BoE) raising the base interest rate.

Regarding the general election, it all could depend which party wins or what coalition combination is named to form the Government, after Labour recently confirmed that they would introduce a mansion tax if they come to power. Meaning that the changes to Stamp Duty that were announced in the 2014 Autumn budget would be negated if Labour win.

Less clear is what will happen with Bank of England interest rates. It had been predicted that a small rise, either by a quarter to half of a percent, was going to be introduced before the end of 2014, but that didn’t happen. Then it was going to be early 2015 but that is now also looking very unlikely.

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Are Property Price Rises Slowing?

Are Property Price Rises Slowing?

Is The UK Property Market Just Experiencing
A Seasonal Slowdown Or Is It Something Worse?

There are a lot of reports in the media attempting to suggest that the UK property market is doomed to failure, with the latest House Price Indices (HPI) published by mortgage lenders suggesting that the UK property market is slowing, however there are fears that it might be in more serious trouble.

Halifax latest figures show that property prices in the three months prior to September 2014 were 2.7% higher than in the preceding quarter but there was an average 0.6% property price rise across the UK during September, resulting in an average property price of £187,188 (GBP).

Halifax say that this is the second successive decline in the quarterly rate and predict that the annual house price growth rate has already peaked at 10% and future growth will be at a considerably slower pace. 

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Average Residential Property will cost

 £267,000 by 2018

Average UK Residential Property Prices Increase

Average UK Residential Property Prices Increase

Average UK residential property prices for 2014

are estimated to be 2.3% higher than in 2007

Forecasts from the Centre for Economics and Business Research (CEBR) suggest that a typical residential property in the UK will cost an average of £227,000 (GBP) in 2014, overtaking the average peak price of residential property observed at the height of the housing bubble in 2007, for the first time.

The CEBR also predict that the average residential property price will be £222,000 (GBP) by the end of this year, 1.4% higher than average property prices reached in 2012.

By 2018, the CEBR expect the cost of a typical residential property in the UK to average £267,000 (GBP).

In 2014, the CEBR estimate that the Government’s Help-to-Buy scheme could raise UK property prices by up to 0.8% without having any appreciable impact on the current housing supply.

However, if the upward trend in residential property prices continues, it could lead to an additional 4,800 residential properties being built in 2015.

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The North-South divide in UK residential property prices look set to widen further by the end of 2013, according to a new study by the Centre for Economics and Business Research (CEBR).

London property prices are expected to grow by up to 2.4% in 2012, while properties in the North-East will see values fall 2.7%, as the capital remains relatively unharmed by the wider impact of the double-dip recession.

Wales, the North-West, Scotland and the North-East will see the values of their properties fall in each of the next two years. By contrast, London and the South East will grow by at least 2% in both 2012 and 2013.

London remains a safe haven for wealthy overseas investors. But this does little to protect other areas of the UK where demand from overseas investors is slight.

Even low interest rates and a lack of suitable housing supply have failed to prevent property slumps in other regions.

The UK average house price change is expected to be an increase of just 1%– an improvement on last year’s 1.5% fall, but way down on the 2007 pre-crash boom of 11%.

Douglas McWilliams, the chief executive at CEBR explains: “Demand in the London market remains resilient with the ongoing Eurozone drama piquing international interest in the capital. Furthermore, we can expect an abundance of affluent French citizens shopping for London homes if President [Francois] Hollande’s proposed 75% top rate of income tax is enacted.”

New research from the Centre for Economics and Business Research (CEBR) shows UK property prices rising by 0.8% in 2012.

CEBR confirm a view that has remained fairly consistent for the last 3 years, that low interest rates and an increasing availability of mortgage products suitable for First Time Buyers (FTB’s), next time buyers and Buy To Let Landlords will help UK residential property prices creep up over the 2012-2016 period, reaching pre-recession levels in the second quarter of 2016.

The CEBR based its forecasts on a mix of micro and macro factors.

  • The key micro factor is the shortage of housing relative to potential household formation.
  • The key new micro issue is the changes in the planning regulations re-announced in the Budget.

These are likely gradually to boost the supply of housing and will constrain the gentle rise in house prices.

The key macro factors are

  • Affordability
  • Employment
  • Mortgage availability

The first of these will be slightly positive, the second slightly negative and the third increasingly positive.

The CEBR expect the mortgage famine to ease gradually as further quantitative easing flows through the economy and as banks recapitalise themselves.

“House prices have been pretty stable over the past two years” says Shehan Mohamed, main author of this report “Lending for housing was £74.5 billion in 2011 and we forecast that this will rise to £109.9 billion by 2016”.

CEBR’s regional house price analysis, also included in the report, shows house prices are likely to continue to rise more quickly in the London and the South East, though the gap in house price inflation with the rest of the country is likely to close because of the 7% stamp duty and the heavy taxation on corporate home ownership announced in the Budget and because of the non-recurrence of special factors like the Arab Spring and the euro crisis which boosted the London market in 2011.

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