Property prices in the UK are predicted to continue their upward trend, rising by nearly £60,000 over the next five years, according to new research.
Prices are expected to rise by 3.5% in 2016 with further annual increases of around 4% in the four years that follow, says the latest analysis from the Centre for Economics and Business Research (Cebr).
Indeed, the forecaster says that 2015 annual house price growth has been revised up from 4.7% in June to 5.6% this month and the average price of a UK property is set to stand at a record high of £263,000 this year.
The research also shows that the price gap between a terraced house and a purpose built flat in London nearly quadrupled from £46,000 in 2000 to £176,000 in 2014.
It points out that a lack of properties coming onto the market is one of the reasons behind the upward revision to the forecast. Households expect property values to keep rising so as such individuals want to sell at the top of the market, but at the moment few anticipate a downturn in prices.
Yet overall home ownership has risen dramatically among older households since 1981, but has collapsed among younger households. With retired individuals less likely to move home, this is curbing the number of individuals putting property up for sale, the report explains.
It also reveals 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 but for many this has become infeasible. The high cost of moving home, with stamp duty costs curbing house moves and the report says 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.
Low levels of housebuilding are also reducing the number of new builds being put up for sale in the UK. The Cebr suggests that the new Housing and Planning Bill will not go far enough in controlling rising home prices.
It claims that reconsidering various other housing market features is also necessary. For example, the UK’s population is getting older and with retired individuals less likely to move home, added incentives are necessary to encourage ‘rightsizing’. For example, a stamp duty exemption or reduction for those looking to ‘rightsize’ would encourage pensioners to put larger properties on the market.
‘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 house building, but also other factors such as an ageing population and the rising cost of moving up the property ladder,’ said Nina Skero, Cebr economist and main author of the report,.
‘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,’ he added.
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