2007 looks expensive for homebuyers
Published On 23 March 2007
The UK's housing market defied all predictions by remaining robust and even growing during 2006. House prices rose by a jaw-dropping ten per cent - and people were forced to take on ever increasing mortgages -as prices showed few signs of slowing.So far the new year has seen no signs of the gigantic, swollen bubble bursting. In fact, just the opposite has occurred. This month alone saw a rise in the average house price in England and Wales of 12.2 per cent, according to a survey from property website Rightmove.
And the rate of inflation is currently the highest it has been for two and half years, at 5.7 per cent.
A recent survey from thisismoney.co.uk discovered that one in three people fully expect house prices to keep on climbing this year and those people are probably right. Property evaluation firm Hometrack has guessed that 2007 will see house prices rise by at least four per cent, but many think that, if anything, this is a conservative estimate.
As usual strong growth in property prices in London and the south-east in general is one of the main driving forces behind this frankly ridiculous rise in prices. In areas like Kensington and Chelsea, house prices rose almost 80 per cent over 2006.
Of course prices in the north and Wales were much less active, but still they rose about five per cent on last year, according to the Rightmove survey. Currently the average price of a house up north is approximately £155,000.
The director of research at Hometrack, Richard Donnell, said: "Continued demand from existing households combined with a lack of housing for sale could result in further upward pressure on house prices in the early part of 2007.
"In the absence of any external shocks to knock market sentiment, the demand for housing in 2007 will continue to be influenced by short term expectations over interest rates and the prospects for future house price growth."
This exponential rise in house prices is helping to price youngsters out of the market. Indeed, young people accounted for only 15 per cent of house purchasers in 2006.
Howard Archer, the chief UK and European economist at Global Insight said: "The ongoing buoyancy of house prices threatens to become of increasing concern to the Bank of England, even though the Bank has recently played down the role of house prices in setting interest rates.
"Indeed, if house prices continue to post sharp rises over the next few months, it will increase pressure for the Bank of England to lift interest rates further in the first quarter of 2007.
Overall, things don't look good for new house-buyers this year. We are only a few months into it the year and things could change. But don't hold your breath.
