'Worrying' signs over house prices

'Worrying' signs over house prices

Signs of a "worrying" upward pressure on house prices have been reported by surveyors as the supply of fresh properties coming to market for buyers to choose from shrinks back further.

The Royal Institution of Chartered Surveyors (Rics) said that across the country, the proportion of surveyors expecting to see property values marching upwards in the coming year has grown to the strongest levels seen since spring 2014.

A net balance of 70% of surveyors across the UK predict house price gains in the next 12 months, marking a 10-month high.

Rics said that a balance of 21% more surveyors reported seeing house prices increasing rather than decreasing in March, up from a balance of 15% in February.

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The growing house price momentum appears to have been driven by a further tightening in the supply of homes for sale, with most areas seeing a decrease in new properties coming on the market in March, compared with the previous month, Rics said. It marks the second month in a row that the number of homes coming on the market has shrunk back.

On average, surveyors expect house prices to increase by 2.5% over the next 12 months, and by 4.5% a year over the coming five years.

Simon Rubinson, chief economist at Rics, said it is "worrying" to see indications that house prices are poised for a further pick-up.

He said: "Underlying the trends visible in the latest survey is a very real housing crisis which will urgently need to be addressed by the next government."

Northern Ireland continued to see the strongest house price increases in March, as well as recording the highest price growth expectations among surveyors for the coming three months. House prices in Northern Ireland fell particularly sharply as the economic downturn set in and Office for National Statistics (ONS) figures have shown that they still have some way to climb to return to their pre-crisis peak levels.

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In Wales and Scotland, price gains over the coming three months are expected to be more moderate, Rics said.

The contracting supply of homes for sale has been particularly concentrated in England, amid suggestions that potential sellers are putting their plans on hold while they await the outcome of the general election, Rics said.

In London, a lack of prospective buyers saw the number of agreed sales fall for the 11th month in a row and an overall balance of 24% more surveyors there reported falls in the number of properties coming onto the market.

The upcoming election and recent changes to stamp duty, which have made the tax cheaper for the majority of home buyers liable to pay it, are leading to a more "volatile" picture generally, Rics said, with Scotland and Northern Ireland being the only areas in the UK to have seen consistent growth in housing market demand over the last six months.

As the supply of homes tightens, mortgage availability for first-time buyers with low deposits saved appears to be improving, surveyors found.

The deposits being put down by people taking their first step onto the property ladder were perceived by surveyors to be getting smaller in the first three months of 2015, compared with the last three months of 2014.

This perception fits in with a recent Bank of England survey, which found that banks and building societies became more willing to lend to people with deposits below 10% in the first quarter of this year.

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'Worrying' signs over house prices

In Scotland, Edinburgh is seen as a city with huge growth potential. In 2014, prices in Edinburgh were up 10% in a post referendum boom that shows little sign of slowing down.

Local agents are not expecting quite such stellar growth for the next 12 months, but they think price rises will be well above the average predicted for the whole country.

Rightmove named this as the area where it expects house prices to grow the most over the next five years. It says that over this period there will be a huge number of people moving out of London in order to afford to get onto the property ladder. They want a reasonable commute combined with plenty of attractions in the local area, and Southampton offers all this. With relatively affordable housing stock, it's a prime candidate for growth.

Luton was Rightmove's candidate for the second biggest house price rises over the next five years. It emphasised that this isn't a mater of opinion, it is the result of crunching the data.

Luton is another major beneficiary of the move out of London, and while it is arguably not as attractive a place to live as Southampton, it's only 23 minutes into central London - which rivals some of inner London's commuter times. With average prices of £179,368, it's clearly a far more affordable option, and the area has already started to show signs of a boom.

This was the third area suggested by Rightmove. As with Southampton, it is well positioned for London commuters, and also has huge local attractions.

A survey last year asked young professionals to name the place they would most like to live, and Brighton and Hove were the only areas that appeared on the list outside London.

One of the reasons it's not higher up the list is that houses are already on the pricey side, with an average cost of £338,956 - up 13% in the past year alone.

There may be few people who grow up with the dream of living in Swindon, but the electrification of the rail line to London will bring travel times down across the West Country, so Swindon becomes part of the outer commuter area.

Given that the average property costs £168, 968, it's easy to see why Swindon will be a popular option for commuters on a tight budget.

Bath is also going to benefit from electrification of the line, because the commute to London will fall to a manageable 70 minutes. The beauty of the city - along with a vibrant social and cultural life - makes it a clear choice for more long-distance commuters.

Of course, with an average asking price of £374,617, it's not a tremendously cheap place to buy, but the geography of the city restricts development, so these prices are expected to rise still further.

Property Frontiers says that the booming house prices in Oxford are set to get even higher. At the moment, travel to London takes 60 minutes, but this will reduce even further in 2016 when the line is electrified. Prices in the most desirable parts of the centre aren't much cheaper than London.

However, further out there are pockets of affordability, and when the Water Eaton station opens in 2015 it will open up areas to the north of the city too.

Manchester has seen enormous property price rises over the last couple of years, and Property Frontiers expects this to continue into 2015.

Other commentators are expecting the growth to slow over the next few years, especially given the gains made since 2012. However, demand for properties remains buoyant, and with the growth of the local economy, price rises seem inevitable.

Rising prices in London have pushed buyers further and further out of the centre, so estate agents are now claiming zone three as 'the new zone 2'.

Savills believes that the biggest gains over the next five years will be the less glamorous districts - putting the South and East in the frame. Gritty areas that could benefit include Ladywell, Streatham and Catford in the south, and Leytonstone, Forest Gate and Walthamstow in the east.

Cambridge could also perform well. It has already had house prices lifted by the growth of tech companies to the north of the city, and the arrival of pharmaceutical headquarters will help push prices up further.

In 2016 a new rail service from the city to the science park will keep prices rising, and beyond the opportunities presented by the local economy, Cambridge is also part of the 'outer commute' area of London, which Savills expects to shoot up in value over the next five years.


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