- House prices rose on average 6.3% in 2015 and 0.5% in December, according to major indices, published monthly by The Land Registry, Halifax, Nationwide and LSL Property Services.
- House price growth is expected to continue into 2016, varying between 3% and 6%, say experts.
- Improved employment, rising wages and a continuing shortage of new homes, will drive up demand, despite possible interest rate rises later in the year.
- Overall lending is up, especially Buy to Let loans which increased by 27.4% year on year, according to the Council of Mortgage Lenders (CML).
- Government plans to introduce a further 3% stamp duty on Buy-To-Let on top of current stamp duty, which will take the steam out of the sector when it comes into effect on 1st April.
The latest HomeOwners Alliance House Price Watch for January 2016 shows house prices over the last 12 months increased by an average of 6.3% and growth is expected to continue into 2016. Nationwide is predicting growth of between 3% and 6%, while RICS predicts 6%.
There were 101,960 home sales between October and November 2015 which is up 3% on the same period a year ago (seasonally adjusted HMRC).
Despite the likelihood of an interest rate rise towards the middle of 2016, improved employment and wage levels are expected to boost buyer demand. Alongside strong demand, supply pressures are expected to remain with the numbers of new homes being built lagging demand.
Overall lending increased 8.2% in 2015 year on year with loans to first-time buyers up 5.7% and home movers up 5.1% and buy-to-let loans up 27.4% (CML Q3 2015 data).
Buy-to-let concerns flagged by the Bank of England has led to stamp duty changes. A further 3% stamp duty is being introduced by the Chancellor on 1st April, and will dampen the sector. Until then, expect a flurry of activity as landlords snap up homes before the new tax takes effect.
Regional Summary
House prices in the South, particularly London, have risen faster than the rest of the UK.
Regions with higher rates of employment growth have seen stronger rates of house price appreciation. Notably, the gain in employment in London is up 14% since the pre-crisis peak according to Nationwide data.
Looking ahead, above average price gains look less likely in London as the earnings to house price ratio becomes stretched.
Commenting on the findings, Katherine Binns, Research Director of HomeOwners Alliance, says:
“2016 will continue to be a seller’s market, as rising employment and wages, bolster demand. Any rise in borrowing costs will be gradual while supply and demand issues will continue to put upward pressure on prices.
“On a regional level, London house prices are unlikely to continue their meteoric performance. Increasing unaffordability, hikes in stamp duty on high value properties, and the clamp down on buy-to-let will all hit London more than other parts of the country.”
