Britain’s biggest mortgage provider, Halifax, has revealed that house prices are expected to rise at a rate of between 4% and 6% in the year 2016. This is compared to the last year, where prices rose almost 10%. The predicted slowdown is due to continued trouble with affordability and managing to get onto the housing ladder, as well as an anticipated rise in interest rates.
House price growth is expected to fall despite the fact that demand for housing still hugely outweighs supply, and the government continues to miss its targets on building new homes. According to Shelter – a housing and homelessness charity – the UK needs to be building 250,000 homes every year to keep up with demand; in the 12 months up to September 2015, the government revealed only 137,490 homes were built. The longer targets are not met, the worse the problem becomes, and the hard it is to fix.
Martin Ellis, the housing economist at Halifax, said: “There is little reason to expect any fundamental shift in the key market drivers in the immediate future. As a result, the substantial imbalance between supply and demand is likely to persist, maintaining upward pressure on house prices in 2016.”
The benefits of house price increases and decreases are felt differently by certain sections of society. Those stuck in rental properties because they cannot afford to buy themselves a home hope to see prices fall and become more affordable. The solution for this group – generally the younger generation, often earning above average wages, and hoping to buy their first home – is the building of more houses to balance out the problem with supply and demand, and therefore reducing prices. However, for those who already own a home, a sharp reduction in prices can be disastrous, potentially pushing them into negative equity.
For the majority of people, a home is likely to be the biggest and most expensive purchase one makes in a lifetime. This opportunity, to own a home should be given to all citizens and therefore affordable housing must be available at all levels of income.
