House prices in the UK will see slow but steady growth in 2015, the Royal Institution of Chartered Surveyors predicts.
The latest RICS report forecasts an average increase of three per cent over the course of next year. The figure is a marked contrast to the growth recorded in 2014, as the market slows down ahead of the 2015 election and a long-awaited rise in interest rates.
In the short-term, though, demand is expected to be bolstered by the Stamp Duty reform announced in the Autumn Statement, which, combined with the ongoing lack of supply, will push up prices.
The number of sales transactions should see a further increase during 2015, predicts the RICS, moving up to 1.25m (from 1.22m in 2014). Although there are some concerns about mortgage availability in the wake of the Mortgage Market Review, a firm economy and stamp duty reform should underpin activity levels. Although this figure represents an improvement on the past few years, to put this in context, in 2006 total transactions stood well above at 1.67m.
Lack of supply to the housing market remains a running trend, and one that cannot be addressed fast enough. However, we are seeing increasing levels of house building projects underway, and as a result, RICS forecast housing starts to rise to 155,000 in England during the year. This is compared to 125,000 in 2013 and only around 100,000 in 2012. While this is an encouraging trend, it is still insufficient to address the more rapid growth in population and will leave significant shortfalls in all tenures.
Across the UK, RICS forecasts that all parts of the country to see modest price rises during 2015. After a long period of booming growth, though, London will experience the lowest rises, with prices in the South West, Wales and the UK capital increasing by two per cent and zero per cent respectively.
Indeed, having outperformed in the early stages of the recovery, chartered surveyors reported London's housing market was 'pausing for breath' both in terms of pricing and activity towards the end of 2014. This does however mask significantly different behaviour across different parts of the capital and is reflected in the RICS forecast with the eastern boroughs and some other non-prime areas still likely to see more buoyant market conditions persist through 2015.
The UK housing market is set to become a key election issue, adds Jeremy Blackburn, RICS Head of UK Policy: "The political ambition to meet the UK's housing deficit of 240,000 means that debates around planning, development and delivery will monopolise the pre-election period in the run up to May 2015. We've seen four housing ministers in this Parliament and there is no reason to think that housing won't continue to be a political football in the next."