OBR: House prices to grow 24% by 2018
Now is certainly the time for residential property investment in the UK, with house prices expected to grow by a staggering 24 per cent between 2013 and 2018. The Office for Budgetary Responsibility (OBR) has revised its forecast upwards for the next five years following better than expected value growth this year.
It is expected that prices will rise 3.7 per cent for 2013/2014, 5.8 per cent in 2014/2015, seven per cent in 2015/2016, 4.2 per cent in 2016/2017, 3.7 per cent in 2017/2018 and 3.8 per cent in 2018/2019. This will coincide with increases in transaction volumes, which will rise as a faster pace than originally predicted. For 2014/2015, housing transactions are expected to grow by 1,280,000 - 12 per cent higher than first predicted.
"Our house price inflation forecast has been revised up significantly, reflecting the momentum in house prices this year and supportive mortgage financing conditions," the OBR report explained. "We expect house price inflation to be above five per cent in 2014 and seven per cent in 2015. Relative to our March forecast, we have revised the level of house prices up ten per cent by 2017/2018."
This forecast is largely in line with current market reports, which have shown conditions strengthening considerably in recent months. The House Price Sentiment Index (HPSI) from Knight Frank and Markit showed that between September and November the HPSI reached a record high.
Londoners are particularly optimistic, as are those that own their own homes. Households think that the value of their homes increased in November for the eighth consecutive month, with more than 20 per cent of the 1,500 homeowners surveyed across the UK stating that the price of their property had increased in the last month. Just 5.2 per cent of households think the value of their home fell last month, leading to a HPSI reading of 57.8.