Assetz® News - Steady increase in UK house prices

Steady increase in UK house prices

19th December 2005 |

Many experts had predicted a crash or at least a slump in UK house prices following the extraordinary rises in the last few years, but recent reports tend to agree that the next two years will see continued and steady growth.

Research from propertyfinder.com indicates a healthy property market and suggests that property investors are enthusiastic about their prospects.

"The dark days of late 2004 and early 2005 for the housing market are well and truly behind us," said Jim Buckle, managing director at Propertyfinder.com.

"Propertyfinder.com's research tracking buyer and seller confidence is a good predictor of housing transaction volumes and shows that transactions are set to increase into the new year by around 30 per cent compared to last year," Mr Buckle continued.

He did predict, however, that interest rates would remain fairly stable meaning that property investors cannot expect a great deal of help from the Bank of England. He went on to reveal some of his predictions for regional variations, observing that London continues to lead the way in the UK property market.

"The City is giving a necessary boost to the market in London and the south-east where the housing market is already improving. However, we expect regions further north to take more time to follow suit. Despite a much healthier market in transaction terms, we don't expect much movement on actual prices and are forecasting rises of 2.5 per cent for the UK overall," he concluded.

The steadier rise in house prices means that they are now beginning to move in conjunction with inflation and experts from propertyfinder.com have stressed that this will lead to greater affordability as wages increase at a faster rate.

Similarly encouraging predictions have come from The Royal Institute of Chartered Surveyors (RICS), which forecasts four per cent rises in each of the next two years.

"The modest pick-up in house price rises for next year reflects the impact of the August interest rate cut, as well as a lift from a further expected 0.25 per cent interest rate cut in the first half of 2006," said a report from the RICS.

Although this report is the most optimistic of the current predictions, most organisations concur that there will be solid growth and an apparent avoidance of the bust that many said must necessarily follow the boom. Even fall-out from the U-turn on Sipps has failed to significantly dent the market, and Stuart Law, managing director of property investment specialist Assetz, has recently argued that Sipps were actually inappropriate for most residential property investors looking to supplement a retirement fund.

"Managed funds, now the only route into residential property for pension holders, are accessible to the masses with lower entry levels as well as better lending and gearing, allowing better performance in the long term," said Mr Law.

There appears to be a general optimism in the property market as we approach the New Year and this is perhaps encapsulated by a report in the Sunday Times on December 18th. Referring to the previously anticipated crash in the housing-market, Clare Francis claims that it has instead enjoyed a "soft landing" as confidence returns and investors look to capitalise on encouraging forecasts.