The Nationwide says house prices will rise three to six per
cent in 2016, despite the prospect of interest rate rises during the next
12 months.
“After moderating during the first six months of 2015, house
price growth has remained in a narrow range between three per cent and four per
cent in recent months. This is broadly in line with earnings growth and
close to the pace we would expect to prevail over the longer term” according to
Nationwide chief economist Robert Gardner.
But he warns that future risks will include accelerating house
price growth, at least at the national level, despite interest rate rises “from
the middle of next year.”
Gardner says: “Further healthy gains in employment and rising
wages are likely to bolster buyer sentiment, while borrowing costs are expected
to rise only gradually. However, the main concern is that construction activity
will lag behind strengthening demand, putting upward pressure on house prices
and eventually reducing affordability.”
But while he says national average price rises in 2016 will be three to six per
cent, it is arguable whether the current divergence in regional house prices
will continue.
“Prices in the South of England, and especially in London, have
been outpacing the rest of the UK by a wide margin. Indeed, prices in the South
of England are now well above their pre-crisis levels while they remain below
in Scotland, Wales and large parts of the North of England” he says.
“With affordability metrics in the capital stretched by historic
standards, another year of above-average price gains appears unlikely – though
in truth, we held a similar view at the end of 2014."
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