What will happen to property prices in 2014?

Latest reports forecast continued rise though not a 'housing bubble'

Expectations for future house price growth are at a
fourteen-year high, according to the Royal Institution of Chartered
Surveyors.

Its latest report shows that almost 60 per cent more chartered surveyors across the country predict prices to continue rising next year rather than drop back, the highest figure since September 1999.

The RICS figures also indicate that all regions of the UK saw price rises last month for the second successive month. The average number of homes sold per chartered surveyor also rose to over 20, compared to 16 over the same period last year.

Simon Rubinsohn, RICS Chief Economist, said: "It's no secret that the housing market is on the way up and prices are surging ahead in many parts of the country. The Bank of England's recent decision to withdraw the Funding for Lending scheme  could well have some impact on the number of people able to purchase a home.

"One thing we are very concerned about, however, is the lack of both new and existing homes coming on to the market. As the Chancellor pointed out last week, housebuilding is on the up, but it is rising nowhere near quickly enough to make up the shortfall that has built up in recent years. If there is not meaningful increase in new homes, the likelihood is that prices, and for that matter rents, will continue to push upwards making the cost of shelter ever more unaffordable."

The Council of Mortgage Lenders' latest study, also released today, suggests that activity in the housing and mortgage markets will continue to rise in 2014, though argues that an "unbridled housing boom" is unlikely.

The CML is forecasting a rise in gross lending from an estimated £170 billion this year to £195 billion next year, and £206 billion in 2015. 

"We think there are good grounds to be optimistic that the vast majority of households will cope with a slow but certain transition to more normal interest rates," said CML chief economist Bob Pannell. "This seems to be the game-plan which the Bank of England has in mind, but presumes, as we do,  that the UK avoids a destabilising housing boom over the next few years."

Mark Harris, chief executive of mortgage broker SPF Private Clients, added:  "Comments from Mark Carney suggest that he will prevent a housing bubble if one starts to emerge. But this does not necessarily mean rocketing interest rates. Redirecting FLS funds is a more measured and sensible way of keeping the housing market under control. However, borrowers do need to ensure they can cope with interest rate rises when the time inevitably comes and opt for a fixed rate if they need help with budgeting.

"The latest RICS survey indicates that property prices continue to soar but much depends on where you live. While London is a micro market of its own, other parts of the country are seeing far less activity and demand, which is keeping a lid on prices. It is important to keep regional variations in mind rather than being too general about the prospects for the housing market as a single entity."

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