British house prices to rise 5% this year

British house prices will rise more slowly next year than in 2015, according to a Reuters poll of analysts that also found interest rates would have to reach 3 percent before seriously affecting the market.
The bedrock of consumer wealth in Britain, house prices will rise 5 percent this year and 4 percent in the next two years, according to a poll of 22 property market experts taken in the past week, similar to forecasts published three months ago.
Wages will pick up faster than inflation — pegged at 0.2 percent this year, 1.6 percent in 2016 and 2 percent in 2017 — but will not match house prices rises until 2017, another Reuters poll found.
“An acute shortage of homes for sale, coupled with a recovery in housing demand as the labor market continues to strengthen, is putting upwards pressure on house prices,” Capital Economics’ Matthew Pointon said.
“However, with interest rates set to rise gradually from next year, and house prices already at very high levels, gains in 2016 and 2017 will be far more modest.”
Interest rates have sat at a record low of 0.5 percent since early 2009 and a Reuters poll this month suggested they will not rise until early next year and that even then, increases will be gradual.
Sixteen of 19 participants in the poll said the housing market was strong enough to withstand higher interest rates and the median said the lending rate would need to reach 3 percent before having a serious effect, something the rates poll predicted would not happen until 2018 at least.
“Small, gradual and anticipated interest rate rises, alongside decent GDP growth, are unlikely in themselves to derail the housing market,” the Council of Mortgage Lenders’ Bob Pannell said.
In a further sign Britain’s housing market is on solid ground, mortgage approvals rose in July to their highest level in 17 months.
The average asking price for a home in greater London was 606,826 pounds ($951,078) in August, property website Rightmove said last week, more than double the national level of 292,284 pounds.
With the national average annual salary at 27,200 pounds last year, house prices in London — which have surged in recent years — were therefore deemed unaffordable or very unaffordable by all but one respondent in the poll.
If prices rise 5.3 percent this year, 3.5 percent in 2016 and 4.5 percent in 2017 as expected, homes in the capital will be even further out of reach of most people.
Medians from the poll said the average level of London house prices on a scale of one to ten — from very cheap to very expensive – was nine. On a national scale they were rated seven.
“London is now significantly above its previous peak and a large part of a generation is priced out of the market. Across the country, this is markedly less true,” independent consultancy Building Value’s Tony Williams said.