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House Prices Set to Fall in 2015?

House Prices Set to Fall in 2015?

In a month when Europe drops into what could be a deflationary spiral,  oil halves in price compared to just a few months ago and retailers report falling prices in the UK, it should surprise no one that house prices may well follow. The Centre for Economics and Business Research (CEBR) is predicting prices will fall 0.6% in the year ahead, with London seeing the first marked falls for more than five years. Prices in the capital are expected to fall by 3.3%.

"Leading indicators such as fewer new buyer inquiries and properties taking longer to sell already point to falling prices," said the CEBR. "Even after May, when the elements of political and taxation uncertainty are less of a factor, the CEBR does not expect a strong post-election bounce back."

The latest credit conditions survey by the Bank of England also found much reduced demand for mortgages in the fourth quarter of 2014. Mortgage approvals for house purchase dipped to 59,029 in November from 59,511 in October, and there are 22.9% fewer applications than at the beginning of the year.

Mortgage brokers said the Bank of England's figures confirmed their experience of a significant slowdown in the housing market towards the end of last year. Chief executive of mortgage broker SPF Private Clients, Mark Harris, said: "Things slowed to such an extent that demand was at its lowest since the third quarter of 2008, while there was also a decline in buy-to-let lending."

Potential buyers are finding that lenders are much less willing to offer 90% loans or high loan-to-income multiples, and in our opinion most of these 'mortgage volume' based statistics can be explained by the introduction of the 'Mortgage Market Review' (MMR) last May which has significantly curtailed peoples ability to get a mortgage - this will have taken several months to show which is what we believe we are now seeing, though that does not explain the fall in Buy To Let mortages which ought to be unaffected by the MMR.

The CEBR's forecast of outright falls in property prices this year is shared by few other economists. Halifax said it expects prices to rise by 3% to 5% in 2015, once the pre-election lull is out of the way. The surveyor's body, Royal Institution of Chartered Surveyors (RICS), is also predicting 3% growth across Britain, but with prices remaining flat in London.

Economist at IHS Global Insight, Howard Archer , said the rapid cooling in the property market over the past couple of months may soon be over. "The weakening of buyer interest in houses may well be close to bottoming out and we do see it picking up to a limited extent in 2015 from current levels.

"In addition to the stamp duty reform, some support for housing market activity should come from a number of factors: elevated consumer confidence, high and rising employment, and still low mortgage interest rates, especially as the Bank of England looks unlikely to raise interest rates before late 2015. In addition, earnings growth finally appears to be firming and we expect it to gradually improve over the coming months.

"Given this backdrop, we expect house prices to rise by around 5% in 2015."  Halifax went on to say that stamp duty reforms may also help more first-time buyers access the property market in 2015 after first-time buyers enjoyed a bumper year through-out 2014.

Halifax added that the stamp duty reforms could also help more first-time buyers access the property market in 2015. It said that first-time buyers enjoyed a bumper year in 2014, with their numbers growing by 22% to 326,500 in 2014, which came on top of a 23% increase the previous year.

Craig McKinlay, mortgages director at Halifax, said: "Improving economic conditions and rising employment levels have boosted confidence among those thinking about getting on to the housing ladder for the first time, contributing to the significant increase in the number of first-time buyers in the past two years."

See more discussion on this at: http://www.landlordreferencing.co.uk/forum/discuss/community-forum/are-house-prices-set-to-fall-in-2015/#p27601

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