6th October 2014
After growing by 7.8% this year, average house prices across the UK will dip by 0.8% in 2015 a new report from the Centre for Economics and Business Research (Cebr) has warned.
The think-tank believes that the British market has hit a turning point and that the anticipated decline will be even more dramatic in London where it expects that the 17.1% growth witnessed this year will be followed by a 2.6% contraction in 2015 as demand, both domestic and overseas, declines.
In the capital, Cebr’s research highlighted that leading indicators, including falling new buyer enquiries and properties staying on the market for longer before they sell, already point to price declines. In addition, it noted that affordability has become such an issue in London that prospective buyers are starting to baulk at high prices.
Compounding this, it said, is a decline in overseas demand as London property prices are now above their pre-crisis peaks in US dollar and euro terms – making it less attractive for overseas investors. In addition, UK property is increasingly looking like a less safe investment it added.
The uncertainty over the next election and UK governance following the fallout from the Scottish independence referendum and the risk of an uncertain relationship with the EU make the UK appear inherently more unstable than in the past, while the proposed mansion tax raises the prospect of expropriation of wealth in the future – something which will deter overseas investment in the UK urged the report.
It added the Mortgage Market Review (MMR) guidance, introduced in April, has led to a weaker outlook for mortgage approval growth as eligibility criteria have become tougher which should curb demand for property in the short term.
Scott Corfe, head of macroeconomics at Cebr and main author of the report, said: “Tougher mortgage eligibility criteria, high deposit requirements and concerns about future rate rises are starting to take steam out of the UK housing market. But the risks should not be exaggerated – the price falls forecast for next year will be modest and we shouldn’t be too worried about this – we are not anticipating a crash. The market is adjusting after getting ahead of itself at the start of 2014.”