The UK housing prices predicted to rise by 8% – What’s cooking in 2014?

According to the bullish predictions by property professionals and expert economists, the home prices in the UK are all set to rise by 8% in 2014, banking on the large amount of surprise gains that were made in 2013. After the result of 7 surveys by banks, real estate agents, surveyors, there are forecasts of widespread growth with gains in all parts of the nation, not just south-east and London. The initiatives of the UK government to encourage lending mortgage loans have yet again restored confidence to the real estate property marked and driven the excessive demand of the consumers. This trend is set to continue throughout 2014 and may also mean tougher affordability tests on mortgage loans.

Home prices in Wales and England are predicted to keep rising throughout 2014 unless there is a dramatic rise in the number of homes for sale. There has been a constant squeeze on residential property supply, particularly in South-east England and London and this has been the reason behind the rise in the prices by 8% in 2013, according to the estimates of the industry. Greater confidence among the prospective buyers and higher levels of lending mortgages should also help increase the levels of transaction.

The aforementioned forecasts on the UK housing prices come as the Office for National Statistics announced a fall in the average rate of inflation. However, the CPI or the consumer prices index that rose 2.3% in November 2013 as compared to 2.1% the previous month doesn’t include the mortgage loan costs. Across the UK house prices remained at their peak level in 2007, as per the ONS measure, yet they’re raising super-fast. London has often been referred to a micro-economy and is struggling to fight with its near-record population. The home-building rates in the capital are at a level that is half that which is needed to meet the demand of the buyers. In fact, the gap between housing costs in London and the rest of the United Kingdom is gradually rising higher.

The Bank of England will be watchfully monitoring the housing market in 2014 and a chief economist at HIS, Howard Archer said that this could possibly slow down the market. He also added that a combination of actions might have some breaking impact on the UK housing market and this could include a dilution of the “Help to Buy” scheme and a close monitoring of the underwriting standards on the mortgages. In fact, there could also be a further tightening of the underwriting standards of the mortgage loans.

Archer, who is one of the first economists who thought the price inflation to hit 8% also added that the Bank of England would also raise the interest rates to rein in the housing market but it’s clearly hesitating to do this soon due to the impact this could have on the UK economy. So, if you’re a homebuyer residing in the UK, you can take into account the above mentioned details so that you don’t make mistakes that can boomerang in the long run.