Since December 2015 house prices have already risen by 0.5% and are set to continue rising throughout the year, experts predict. How high the rise will go is yet to be determined as factors such as interest rates and sliding stock markets should be taken into account, but most have predicted a rise of between 4-6%. There are fears that the global economy is a ticking time bomb with a crash looming and the inevitable consequence on the UK housing market, but for now the outlook is optimistic as the year begins with house prices rising in a sellers’ market.
Many areas have seen housing demand outstrip supply as rising wages allow first time buyers to enter the market and with Rightmove reporting a 21% increase to their websites visits compared to this time last year; it seems this trend will continue into the year. There has been some increase of availability in the first time buyer target sector of two bedrooms or fewer recently, which is a result of private landlords selling up due to the new tax regime, but with the introduction of the Help to Buy ISA then demand in this sector will certainly increase. To tackle the shortage, the government aim to build 400,000 affordable new houses by 2020. Of this, 200,000 will be starter homes for the first time buyer market; however these have already been criticised as too expensive for most people to afford. For this year at least, the lack of stock will dictate the housing market and lead to price increases out of reach of any rises in household income.
There has also been concern of a skills shortage in the construction sector leading to higher costs and delays for housebuilders. It is thought that, as with the housing market, demand will outstrip supply driving up the wages of the workers, with 61% of construction firms reporting a sharp rise in wage costs. Some parts of the country are experiencing such lags in the construction of new housing that housebuilding is running at half the level needed. These additional expenses are expected to be piled onto the house price which will undoubtedly affect the property’s affordability. Will these rising costs in housebuilding hinder the Government’s pledge of affordable new housing? That is yet to be seen.
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