Also predicted in the forecast is an increase in rents by 2%.
Reinforced by fresh changes to Stamp Duty and a lack of supply of property, RICS has announced that it expects all parts of the country to see price rises during 2015 at an average of 3%. The South West, Wales and London will experience the lowest rises with prices increasing by 2% and 0% respectively.
The growth in rental demand softened in the early part of 2014 as the sales market began to recover across the UK, and potential purchasers took advantage of the ‘Help to Buy’ scheme. However, enquiries to rent property have begun to pick-up once again and comfortably outstrip new supply of rental property from landlords.
As a result, RICS expect rents to continue pushing upwards over the next twelve months, to a two per cent increase in rents. Chartered surveyors suggesting that the strongest rises are likely to be recorded in the South West and the North East of England. Rents in the capital are likely to rise broadly in line with the national average.
Lack of supply to the housing market remains a running trend, and one that cannot be addressed fast enough. However, RICS are seeing increasing levels of house building projects underway, and as a result, RICS forecast housing starts to rise to 155,000 in England during the year. This is compared to 125,000 in 2013 and only around 100,000 in 2012. While this is an encouraging trend, it is still insufficient to address the more rapid growth in population and will leave significant shortfalls in all tenures.
The number of houses taken into possession are expected to have fallen in 2014 to around 23,000, the lowest since 2006. Given the current macroeconomic picture, RICS anticipates that this could decline to below 20,000 over the course of the next twelve months, particularly as around ninety percent of new loans are being taken out on fixed rates, which provide some degree of protection against any adverse interest rate changes.
Simon Rubinsohn, RICS chief economist, said the housing sectors affordability issue “is not going to go away” and highlights just how important it is to speed up the supply pipeline of new homes over the coming years.
Jeremy Blackburn, RICS head of UK policy, added: “The political ambition to meet the UK’s housing deficit of 240,000 means that debates around planning, development and delivery will monopolise the pre-election period in the run up to May 2015. We’ve seen four housing ministers in this Parliament and there is no reason to think that housing won’t continue to be a political football in the next. What we need is certainty, clarity and confidence from government to keep us building homes.”
Graham Davidson, Managing Director of Sequre Property Investment comments:
“This report comes as no surprise to us. Throughout 2014, we have seen South East based buyers dominate the North West’s buy to let market as they search for investments that offer better value for money as well as provide stronger returns. This is a trend we expect to continue for the foreseeable future.
London prices have risen faster than anywhere else in the UK over the past four years and this is a trend that simply could not continue. The changes to capital gains tax for overseas buyers and the collapse of the Russian Rouble is likely to further deflate the London market, meaning investors will continue to look outside the capital” Davidson commented.
He adds, “In contrast the North West, with Manchester in particular, has seen steady house price increases alongside major economic investment into schemes such as MediaCityUK, Manchester Airport and the Manchester Metrolink system. The recent launch of direct flights between Manchester and China coupled with the One North transport initiative means that the region’s appeal will only grow, which spells further good news for capital growth in the North West and buy to let investors.”
