Britain’s house prices are out of control because there’s too many people looking for a property and there’s not enough to go around.
And according to estate agent Knight Frank, homeowners are so certain prices will continue to rise over 2016, many are opting to not move.
So what happens when a glut of homeowners decide to not move? You guessed it — it keeps even more properties off the market, hampers supply, and therefore pushes up prices further. It’s a vicious circle.
This is what Tim Moore, senior economist at Markit, said (emphasis ours):
UK households seem to anticipate little fundamental change in prevailing supply and demand dynamics over the course of 2016.
Buoyant forecasts were reported for property values over the next 12 months, with expectations at a remarkably similar level to those seen at the end of 2013 and 2014.
At the same time, the proportion of UK households expecting to purchase a property over the short-to-medium term has drifted down again in December, reaching its lowest since at least the spring of 2014.
Existing mortgage holders and owners opting to stay put are among those driving the trend. As a result, the survey provides an advance signal that the flow of property coming on to the market will remain depleted in 2016, which in some areas could amplify the supply squeeze from stunted house building levels and historically insufficient new build volumes.
Knight Frank’s latest House Price Sentiment Index (HPSI), which it releases with the help of data company Markit every month, showed that homeowners are confident the current property boom will continue in 2016.
Those in London perceived the strongest rate of price growth over the course of the month while households in all UK regions expect house prices to rise over the next 12 months, with the strongest growth expected by households in London
Only 11.1% of individuals said they plan to buy a house within the next two years, down from a 12 month average of 12.8%.
You might dismiss this out of hand — of course, people who own houses think the price will go up — but it turns out that the future HPSI is actually a pretty good indicator of where prices are going. Take a look at this chart:
Knight Frank’s report follows in line with a raft of data that shows Britain’s house prices are going to continue to soar in 2016 and beyond.
A housing research report commissioned by an estate agents group says that property prices are going to rise by 50% within the next decade.
However, London house prices are predicted to nearly double within 10 years.
In November, the Royal Institution of Chartered Surveyors said in its RICS Residential Survey for October that UK house prices are expected to rise by 4.5% per annum over the next five years (a cumulative increase of around 25%). The chief economist at RICS said that property will become increasingly “unaffordable” during this time.