Respected analysts Centre for Economics and Business Research (CEBR) have predicted that the price of a typical UK home will rise by 14% over the next four years.
This would mean that the average house price would rise from the current £176,000 to £200,000, which would be the highest property value ever recorded, after the previous high in 2007 of £191,200.Although this figure is below the rate of inflation, it could be a comfort to the estimated 827,000 homeowners currently estimated to be in negative equity.
The chief executive of CEBR, Douglas McWilliams said that the chronic shortage of homes for sale was the main reason for the predicted rise: “We do not expect a house price boom, but the housing shortage is likely to push prices gently upwards.”Another CEBR prediction that could please homeowners is the belief that the Bank of England base rate of interest will be kept low for years to come.
It dropped to a record low of 0.5% in March 2009 and the CEBR have stated that it is “unlikely to rise above 2% before 2015.” However, this prediction comes on the back of a state of subdued lending; the Council of Mortgage Lenders said that just £12.6bn (the lowest total in July since 2000) was advanced for home loans last month.
Would-be buyers are still being ‘thwarted’ by what is seen as overly-strict criteria to obtain a mortgage with the best deals being saved for those with large deposits, which means that first-time buyers are unable to get onto the market. With people unable to buy, the rental market is experiencing a boom.
Rents are at an all-time high as landlords cash in on frustrated buyers; one of the country’s biggest chains of property letting agents recently suggested that the average monthly rate was £705. London rents were even higher – averaging in at over £1,000 per month. In a cruel twist to first time buyers, LSL Property Services suggested that the ‘bank of mum and dad’ had taken on a new meaning; instead of being the source of a deposit for a home purchase, offspring were relying on their parents to lend them the deposit to get a rental property.