House prices ‘to drop 0.6% this year’
A new forecast has claimed that house prices in the UK will drop by 0.6% this year.
The Centre for Economics and Business Research (CEBR) has said that property prices in the UK capital will fall by 3.3%. CEBR believes that indicators such as fewer new buyer enquiries, along with properties staying for longer on the market, point to falling prices.
Eden Harper, an estate agent covering Brixton and Battersea mentioned values in London were up 16.8% in 2014, meaning the average house price rose 8.8%, the biggest boost since the recession. The CEBR thinks that house price growth nationally will be much stronger when the capital is excluded from the figures.
There are a number of factors which are apparently responsible for the prediction. First, foreign demand for property is set to decline with property values in the capital. There are also concerns over the mansion tax potentially affecting the country’s ‘safe haven’ status (if Labour were to form a government) and finally there’s slowing economic growth abroad, mainly in Russia, which may limit foreign purchases of prime London property. According to the Department for Business, Innovation and Skills, 17% of sales in central London have been to overseas investors since 2010, with clients from Russia, Italy, France and the Middle East snapping up top-end property.
The stamp duty changes introduced at the end of last year could see higher transaction numbers, as they lower tax payments for nearly 100% of buyers. There’s also the possibility of interest rate rises – although the Bank of England has recently said that they won’t increase until 2016. Rates are likely to rise slowly to the new “normal” of 2.5-3% according to governor Mark Carney; however, even a slight increase could push buyers to defer purchases, CEBR said.
This latest forecast predicts a slightly lower drop than it did in its last report in October 2014, when it said prices would fall 0.8% in 2015. In comparison, The Royal Institution of Chartered Surveyors, said that house prices will go up by 3%, while Halifax believes they’ll be an increase of between 3-5%. Global real estate’s services provider Savills, expects property prices to increase by 2%, while the Office for Budget Responsibility (OBR) says prices will surge 7.4%.
The predictions come after massive growth both in the UK and London last year. CEBR said that it expects that house values will continue to rise steadily until 2020.