House price growth to slow (but don’t get too excited)

Hamptons International have updated their 2015/2016 forecast, in line with the gradually improving economic background. However, despite the prediction that house prices will continue to grow, the pace of growth over the next two years will remain subdued.

Affordability constraints, together with a moderating of price expectations for both buyers and sellers mean that house price growth is likely to remain in single digits over the coming two years.

Beyond London and the South, the North West is the region that is expected to outperform its neighbours as confidence in its local economy and future prospects grow.

Despite the changes that have taken place regarding stamp duty, housing market activity over 2015 has been disappointing. There were 15 per cent fewer homes for sale in the first half of 2015 than the same period in 2014 as sellers were reluctant to come to market. This said, a lack of housing stock continues to act as a support to prices.

Looking to 2016, interest rates continue to dwell in unclear waters. It seems most likely that rates won’t move until the second quarter of 2016 and that when they do rise they will settle at a new level of around 2.5 to 3 percent.

In the South East and East, prices are expected to rise by 6.5 percent by the end of 2015 and by 5 percent in 2016

Fionnuala Earley, Residential Research Director at Hamptons International, said: “The outlook for the housing market recovery is modest, with price growth across the country likely to be in single digits. Economic conditions are improving, but there are still constraints on affordability. A lack of stock for sale will continue to support prices in the shorter term, but this should ease as we move into 2016. Price growth will slow in London, the South East and East. The most likely outcome is that rates will stay put until Q2 2016 which should help calm worries and allow a modest housing market recovery to continue.”