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.With the health of the UK property market expected to be high on the campaign agenda for the General Election, it is now looking more likely that Bank of England interest rate rises could be postponed until after May.
Bank of England interest rates have the potential to have a huge impact on the UK property market, with many mortgaged property owners expected to struggle to financially cope with a 1% rise and a 3% rise would be devastating.
But a 3% rise isn’t on the cards just yet, it is a figure being used by mortgage lenders to stress test a borrower’s financial affordability. No one really believes that the Bank of England would suddenly impose such a rise and 0.25% is the most likely opening interest rate rise with perhaps another 0.25% increase by the end of the year.
However, the impact of a 3% interest rate rise shouldn’t be dismissed or ignored. The current Government’s Help to Buy scheme may have been a success but it won’t last forever and employee wages are still failing to keep up with the rate of inflation, pointing to cautious interest rate rises by the Bank of England in 2015.
But what if UK property prices don’t rise in 2015?
You may think this idea sounds ludicrous, but the Centre for Economics and Business Research (CEBR) is warning that UK property prices could slip by an average of 0.6% across the whole of the UK during 2015, with property prices in London predicted to fall by as much as 8%.
Property prices in London have increased by almost 20% in the last 12 months, even with the apparent price falls observed at the end of 2014, however, it is noted that the current average year on year property price rises of around 8% are largely due to the soaring property prices in London and the South East of the country.
But it is a different matter for other parts of the UK, particularly the North of England, Northern Ireland and Wales where property prices have not risen anywhere near as spectacularly.
According to the CEBR the change in stamp duty is expected to boost property market transactions in nearly all UK regions, but this alone is unlikely to entirely offset other factors weighing heavily on the UK property market.
With this in mind, the interest rate rises that are expected to happen in 2015 could well have an unsettling impact on the health of the UK property market overall, making it an interesting year for landlords, property investors and the rise and fall of the UK property market.
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