House Price Prediction 2015

Published / Last Updated on 28/11/2014

Video looks at what we predict will drive property prices in 2015 and for the next few years. Inflation, interest rates, demand, supply of houses, earnings and mortgage lending.

Transcript:

“Hello there. Subject for the video is: your house, your castle and property price inflation.

At the time of shooting this video its November 2014 and we’ve been through quite a boom period with the property price inflation, particularly in the south-east and that is now starting to catch up around the rest of the country. {And] where we’ve seen central London and particularly Greater London, we’ve seen and double-digit growth figures 20% per annum over the last few years as property markets recover, so in some places over the last four or five years property prices have nearly doubled in London and the south-east.

Now what I thought I would highlight is what are our views for the next five years or so in the property market and what are the pressures? So first things first: the property market does move in a boom and bust, don't know which way I’m going, right boom and bust, up and down. The party market does move in cycles depending upon earnings, depending on whether we are receiving pay rises or not, depending upon interest rates and we've had low interest rates for some time.

We were all expecting interest rate rises shortly sometime around about the end of December 2014 and into early January 2015 however, inflation has taken a little bit of hit, where inflation has fallen, where the economy slowed down a little bit. There have even been concerns of the UK potentially having no growth but I’ll be honest I can't really see that over the next few years.

So I just wanted to give you sort of some general guidance about our views for the property markets in London but also then looking at the rest of the country where, we actually see more growth between 2015 and 2019 outside of London.

So what are the pressures? Talked about interest rates and wage rises, wages are starting to rise. Interest rates: we were expecting to rise but now they're being pulled back a little bit because of inflation, but we still see some form of interest rate increase, albeit slowly but towards the middle of 2015 after [the] general election.

Now on top of that, what we've also seen is the Financial Conduct Authority, the finance industry regulator issued, and it started on 1 April, April Fools' Day, the MMR (the Mortgage Market Review) and the mortgage market review was designed to take the heat a little bit out of the property market by making lenders and mortgage brokers more responsible and indeed you was a borrower, making you more responsible. So what has happened basically is: any mortgage scheme now, there is a requirement for it to be suitable and affordable, which I suppose it always was anyway, and then on top of that there are now stress tests. Individual loans where a bank or building society is looking at lending you money as well as checking whether you can afford it today there are now checks whether you can afford this if interest rates went up by let’s say 3% per annum or something like that. On top of that the banks themselves have restrictions on: “right, how much debt can we take on, how much can we expose ourselves to?” So a little bit of control there, a little bit of a squeeze coming in from the Bank of England and the Prudential Regulatory Authority and indeed in financial services, the Financial Conduct Authority regulator to start to control the property market.

But that said, as ever, property prices move in cycles and broadly speaking they’re linked to earnings. Earnings are starting to increase, perhaps London and the south-east is already seeing its main boom and we’re seeing a slowdown now but the rest of the UK is starting to catch up. So I think to try and benchmark this, what we are looking at in terms of our general predictions for the property market in the UK in the next five years is:

We see over a five-year period and on average across the country over a five-year period probably about 20% growth overall. There will be pockets and in lower-priced areas whether it's the East Midlands or other areas like that even the West Midlands potentially as well, in the north-east where property prices may move at a slightly quicker rate and therefore grow by more than 20% in the next five years, Whereas in London and the south-east, we can see that slowing down a little bit but still pushing over a 4 to 5 year period 15 to 18/19% growth.

So [a] little bit of stability. 2014 we are still seen some faster growth out in the regions but then in London and south-east that has slowed down a little bit. But overall, if you are looking at property investment, if you are looking at buying your first home then we do not see a property market crash because there has been control on the markets and there is further control on lending but what we do see is much more stable property market over the next 4 to 5 years.

So I would work on, on average, property price inflation 3.5 to 4% per annum something like for the next 4 to 5 years. Ss ever, I’m not a genius we’re not investment geniuses: If I called the market exactly right then my name would be Warren Buffett and I would be living on my yacht in the Caribbean today and being a multibillionaire, but the reality is we’re taking a sensible approach to say: “right, the population is increasing in the UK, it’s set to what expand by another 10 million people over the next 10 to 15 years or so, so there will be continued demand for property.” Combine that with a stable lending market, we see it as stable property price growth over the next 4 to 5 years. Any questions, as ever, do come back to me. Thanks very much for watching.”



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