House prices in the UK will see an increase of eight percent over the course of next year while the cost of renting a home should rise by a further two percent according to the Royal Institution of Chartered Surveyors (RICS). This growth is being driven by the acute imbalance between burgeoning buyer demand and sluggish supply with new instructions to estate agents close to stagnating.
Although significant challenges remain to achieving a sustainable economic recovery, 2014 may well see the nascent pick-up in activity gather pace and this will be reflected in the housing market. In addition to rising prices, the number of transactions should also see a further increase, moving up to 1.2m (from 1.05m in 2013). Although this represents an improvement, to put this in context, total sales in 2006 were well above this at 1.67m.
With the shortage of homes coming onto the market a key factor behind the price rises, some comfort may be drawn from a likely twenty percent jump in new starts in England over the next year. That would push the total towards the 155,000 mark compared to 125,000 this year 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, all parts of the country should see prices rise next year. Predictably, the biggest increases are to be seen in the capital, where the cost of a home will jump by around eleven percent. It remains to be seen what impact the recently announced increase in capital gains tax for overseas vendors will have on the prime central London market. Meanwhile, the North East and Northern Ireland will experience the lowest rises with prices increasing by five percent and four percent respectively.
UK REGIONAL PRICE GROWTH
East of England 10
East Midlands 10
North East 5
Northern Ireland 4
North West 7
South East 7
South West 7
West Midlands 7
Yorkshire and Humberside 7
• Cost of renting to grow by two percent
• Transactions to increase to 1.2 million
• Housing starts to edge up to 150,000 in England
Peter Bolton King, RICS Global Residential Director, commented:
"The cost of a house is now picking-up right across the country and next year should see more of the same. We expect all areas of the country to see prices increase with London, predictably, recording the biggest rises. The improving economic picture aside, this is largely down to the fact that buyer numbers considerably outweigh the amount of homes on the market. While the number of new homes being built is now on the rise, it still won't be anywhere near enough to meet demand and we expect the problem of insufficient housing stock to be the main driver behind price increases over the next twelve months."