Housing prices in the UK continue to climb, despite a dip in prices in London. While inflation isn’t as high so far this year over last, there does seem to be some indication that home prices will shoot up sharply before the end of the year.
London was the only region to report slightly lower housing prices, down somewhat from their previous peaks. This six month downward trend isn’t expected to last much longer, and the rate of decline is already showing signs of slowing. The Royal Institute of Chartered Surveyors expects that house prices in London could rise by as much as 30 percent over the next five years, making an already unaffordable city even more so.
It is unclear whether the Bank of England will raise interest rates early or leave them and risk another housing price boom.
The housing market’s rate of inflation is at 5.1% so far this year, which is the lowest it’s been in 14 months. It isn’t expected to drop any lower. Analysts are predicting a surge in prices, now that the election has been decided, with the Conservatives victory helping to strengthen the market.
It is believed that recent increases to income, stiff competition between mortgage lenders and fewer houses for sale will force prices higher in the second half of the year. Property prices are at nearly the same levels as they were before the 2008 market crash, despite homeowner numbers being on the decline.
The median deposit for first time buyers is up, at 25%, up from 23% at this time last year. mortgages in arrears or possession have dropped to 1.14% in the first quarter of 2015, while those in the deepest arrears (10% or more of the value of the balance) remain relatively high at 0.32%.
Changes to the stamp duty charge made in December 2014 should also have a positive effect on the market, which is now progressive in nature. These changes mean savings for people buying houses valued up to £900,000.
First time home buyers are down, at 135,000 from January until the end of June. Compare this with the peak of first time buyers at 190,900 in 2006, before the market crisis, and down 10% from the same period in 2014.
The costs of moving house is believed to be negatively affecting the market. Despite the changes in the stamp duty charge, it still serves to discourage people from buying and selling houses too often.
The shortage of houses on the market is also limiting sales, as people have a hard time finding a suitable house to buy. New housing orders are down 7% from 2014, totalling £4.3 billion, including £3.9 billion for private housing orders. For the first time since 2009, the cost of building materials is down.
Despite the current fickleness of the market, housing prices are expected to continue to rise as 2015 progresses, which is good news for those with houses for sale. Lower mortgage rates and savings from the stamp duty charge will help those looking to move house.