A look at what 2015 has in store for the property market
15th January 2013 | 12:00am
15th January 2013 | 12:00am
We've already written about 2014 and the major factors affecting the property market. 2015 is, by all accounts; set to be an equally eventful year. For one thing, there's a general election in May - the least predictable in 100 years according to experts. This creates a somewhat uncertain atmosphere, but things should become clearer in the second half of the 2015; in terms of what the outcome means for the market.
Here are a few other points to bear in mind this year when it comes to the property market...
The Office for Budget Responsibility (OBR), has revised its earlier forecasts up in terms of price growth over the next few years. The Treasury forecaster says it expects prices to rise by 7.4% in 2015 and to increase by 31.4% by the first quarter of 2020. Meanwhile, the Royal Institution of Chartered Surveyors (Rics) predicts that all parts of the UK will see modest price rises in 2015, an average of 3%. However, Rics thinks that London will "pause for breath" while other areas experience some growth. Halifax however, expects prices to increase by 3-5% in 2015, after house prices peaked at 10% in July 2014.
What we say: London may see prices stablise - particularly in the first half of the year (pre-election). However, the more popular areas will experience growth, so it's all about knowing where to buy and understanding your chosen postcode well.
Homeowners have had a pretty easy ride for the last few years in terms of interest rates, after they were slashed to an all-time low post-recession. They've been languishing at 0.5% above base rate ever since! Despite predictions that they'd raise at some stage this year, the Bank of England's Monetary Policy Committee (MPC) consistently voted for the status quo throughout 2014. Initially interest rates were linked to unemployment, but governor Mark Carney quickly changed the criteria, when he realised he was going to hit his target sooner than expected (7%). Now interest rate hikes are linked to wage growth and expected to increase gradually towards the end of the year.
What we say: Interest rates are a key determinant when it comes to momentum in the property market. However, they're unlikely to rise very quickly; the gradual increases will mean that people have time to adapt and won't be put off borrowing. The key thing is to ensure that homeowners have proper access to credit in the first place and aren't deterred by new mortgage rules.
An influx of foreign money also continued to support the top-end of the market throughout 2014. This has been criticised in some quarters, with claims that this investment simply pushes prices up artificially in the prime market (having a knock-on effect on prices elsewhere). Capital Gains Tax (CGT) for foreign buyers will kick in come April; this may have some effect on the market, but it's worth remembering that global instability still makes London a solid haven for overseas buyers.
What we say: The rouble is falling rapidly, meaning that more and more Russian buyers are looking to invest in property in the UK capital. The possibility of deflation in the eurozone and China may strengthen London even further, or it could go the other way and we could see fewer Asian investors putting their money into property.
The overriding issue that could effect the housing market when it comes to the election, is the mansion tax. The Labour Party have said properties that worth more than £2m will have to pay the levy, but it's a policy that's going to be very hard to implement, due to the inevitability of tribunals.
What we say: We personally think the tax will end up being too expensive and probably scrapped. However, those owning properties worth above the threshold need to be prepared for this possibility.
Overall, the good news is that the UK's lack of housing will keep house prices high and so prices are unlikely to fall substantially. In a nutshell: property is always a good bet.