Property prices are predicted to continue their upward march in the years ahead. Prices are expected to be 3.5pc higher in 2016 than they were this year, with further annual increases of around 4pc in the four years that follow.
The average UK house price will leap by nearly £60,000 over the next five years according to an economic forecaster, hitting more than £320,000 in 2020.
The rungs of the property ladder are also moving further apart, according to Cebr (the Centre for Economics and Business Research) – making it harder for people to trade up to a bigger home as the cost has “skyrocketed”.
The forecaster said that house prices in 2015 are set to be 5.6 per cent higher compared with average prices across 2014 – and the average UK property value will stand at a record high of £263,000 this year.
Property prices are predicted to continue their upward march in the years ahead. Prices are expected to be 3.5 per cent higher in 2016 than they were this year, with further annual increases of around 4 per cent in the four years that follow.
These increases will take the average price of a UK property to £321,600 during 2020 – £58,600 more than the average house price in 2015, according to Cebr.
Cebr had previously predicted that house prices would increase by 4.7% annually in 2015, but it has revised its figure upwards to 5.6 per cent in light of a lack of properties coming up for sale, which is “drying up supply” and putting an upward pressure on prices.
It also says that the price gaps between different property types are widening. This is making it harder for people to climb up the property ladder.
For example, in London, someone who wants to move from a flat to a terraced home which is perhaps more family friendly would now need to find an extra £176,000.
This cost has nearly quadrupled compared with 2000, when the price of trading up between these property types was £46,000, according to Cebr.
Nina Skero, Cebr economist and main author of the report, said: “A reduction in the number of properties being put on the market has placed further upward pressure on house prices in some parts of the UK. This is a result of low levels of housebuilding, but also other factors such as an ageing population and the rising cost of moving up the property ladder.
“The price gap between a first-time home and a larger family home has skyrocketed in some regions, such as London, curbing activity in the housing market. For many, the rungs of the property ladder are moving further apart, making it impossible to upsize.”
Current housebuilding plans are not enough on their own to control rising house prices, Cebr said.
It suggested that with an ageing population and retired people less likely to move home, a stamp duty exemption could encourage pensioners to put their larger, family-sized homes on the market.
Why are house prices expected to keep on rising?
- Here are five key reasons given by property forecaster Cebr as to why the supply of homes for sale has been drying up, putting an upward pressure on prices:
- Households expect property values to keep rising. People want to sell at the top of the market, but at the moment few anticipate a downturn in prices.
- Demographic changes and the UK’s ageing population. Home ownership has risen dramatically among older households since 1981, but has collapsed among younger households. With retired people less likely to move home, this is curbing the number of people putting property up for sale.
- A substantial increase in the cost of moving up the property ladder, especially in London. Moving up the property ladder has historically been a key reason to sell a home.
- Low levels of housebuilding are reducing the number of new builds being put up for sale in the UK.
- The high cost of moving home, with stamp duty costs curbing house moves. This is particularly the case at the prime end of the property market, which saw a substantial increase in stamp duty rates in last December’s Autumn Statement.