House prices to rise by £52,000 by 2021

House Prices to Rise

This week saw the release of some interesting predictions of relevance to any potential property investors hesitating about whether to enter the market at the current time.  The Centre for Economic and Business Research (“CEBR”) has surprised some in the industry by predicting that house prices are set to rise with the average house price across the UK increasing by £9,000 this year and by £52,000 between now and 2021.

The means the average UK house price by the end of 2017 will be £220,000, and by the end of 2021 it will be around £272,000.

CEBR says the rate of increase this year and next will be less than five per cent annually as Brexit uncertainty goes on; this compares with a 7.5 per cent year-on-year increase reported by the consultancy in 2016.

Shortage of suitable housing

However, it says there will be a growth spurt from 2019 with an annual increase that year of 5.7 per cent followed by six per cent in each of 2020 and 2021.The consultancy reasons that the long-term shortage of suitable housing will result in the general rise, although it says overseas purchasing of high-end London property while the pound is still low in value will fuel price inflation in those pockets of the market.

“Rising inflation and stagnating wage growth are expected to depress households’ spending power in the coming months. The worsening financial situation of households could easily have a knock-on effect on consumer confidence, suppressing housing demand in 2017 and 2018” per Daniel Neufeld, the main author of the report and one of CEBR’s economists. 

Although in reality house price growth is determined by market and economic forces rather than predications such as those made by the CEBR which are nothing more than “good guesses” about what might happen, the reasoning behind their assumption looks sound.  With no foreseeable end to the ongoing shortage of housing stock demand will continue to outstrip supply for a long time to come which will inevitably result in continuing upward pressure on prices.

In the short-term uncertainty around Brexit and concerns that housing prices may have peaked have deterred some from entering the market but others have seen this as an opportune time to enter the market and take advantage of the bargains that have become and remain available.  The CEBR’s findings will reinforce the view of such optimists that this remains a good time to enter the market. 

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