House price inflation; prospects for 2015 and beyond

House price inflation – the annual growth in average house prices – increased to 12.1% in the year to the end of September, according to the Office of National Statistics (ONS). This was driven by an annual increase in London of 18.8% and to a lesser extent increases in the East (13.4%) and the South East (11.6%).

However, other reports are suggesting a slowdown this autumn. Of course, each of the surveys are based on slightly different measures over different periods, so there are bound to be a few discrepancies. What people really want to know is whether there will be a continuation in house price inflation in 2015.

The ONS data is based on purchases of homes in the UK that have been financed by a mortgage. Its figure for the average cost of a home is £272,000 and the 12.1% annual increase is the highest recorded by this survey since 2007. More recent data from the Nationwide Building Society and Halifax surveys, based on their own lending data, suggest that house price growth has slowed slightly in the year to the end of October.

So have UK house prices – on average – reached a plateau? In a recent comment, estate agent Savills said it expected the UK residential property market to be subdued in the run-up to the May 2015 General Election.

Another estate agent, Knight Frank, also predicts that the scale of Britain’s recent house price increase will not be repeated in 2015, forecasting that average UK property prices will rise by 3.5%, quite a bit lower than the double digit house price inflation of the last couple of years.

However, whilst UK house price inflation is likely to slow down next year, Knight Frank predicts that it is set to rise 18.2% between 2015 and 2019, with London property inflation forecast to hit 25.8% during the same five year period and the South East not far behind at 23.4%.

Knight Frank HPI Table

Source: Knight Frank / Markit

“Whatever the outcome of the election, our view is that growth will be less marked over the next five years than the last five, when prime central London’s safe-haven appeal during the financial crisis contributed to a cumulative rise of 61%,” said Tom Bill, head of London residential research at Knight Frank, in the report.

What should you do?
Whatever your thoughts on house price inflation in 2015, why not contact Marchwood IFA for a chat about your own options? Unlike individual high street banks and building societies, we are not limited in the range of mortgages we can consider for you. Finding the right mortgage product is one thing but getting a mortgage offer is altogether different. And this is where we really add value. Our sole objective is to get you what you want in the most painless way possible. When dealing directly with the banks this is not always as straightforward as it should be. We collect everything required from you and liaise on your behalf with the lender until the mortgage offer is produced and you can move into your new home. Whether you are buying a new home or an investment property or wish to refinance an existing mortgage, we have the skills, tools and experience to help.