There has been an ongoing decline in interest in UK property in the latter part of 2014 with some experts blaming a buoyant market, with prices rising too quickly, together with stricter lending criteria. While there is no doubt that these particular factors have played a part in the reduced number of mortgage approvals it is perhaps the wider perception of the worldwide economy, the UK economy and value in the UK property market which is of greater concern.
How will UK property prices perform in 2015?
If you look back at June 2014 the annual rise in UK property prices stood at 11.8%. However, in the latter part of the year we saw a minimal rise in property prices culminating in an increase of 0.3% in November and 0.2% in December. Reduce growth rates in the second half obviously impacted the 12 month rate of growth in property prices and we begin 2015 under something of a cloud.
The Office for Budget Responsibility (OBR) believes that UK property prices will rise by 7.4% in 2015, falling to 5.9% in 2016 and 5.8% in 2017. While there is no doubt that many things can happen between now and 2017, the ongoing reduction in UK property price increases is obviously a concern to investors. It is also worth noting that the likes of the Royal Institution of Chartered Surveyors and the Halifax have produced even more depressing forecasts for 2015 of between 3% and 5% growth.
Why is the UK market under pressure?
In many ways the UK property market has been supported by the authorities over the last couple of years with an array of financial incentives. However, as lending was getting out of hand this prompted the introduction of strict lending regulations which have impacted mortgage approval numbers and the number of properties changing hands. The reorganisation of the UK stamp duty system will have a beneficial impact in the medium to long term but at this moment in time investors are looking more short-term and seem concerned at what they see.
We must also take into account the fact that the UK property market has performed admirably in recent times and the UK economy has been one of the strongest in the Western world. There is some concern that the authorities have supported the property market ahead of the forthcoming general election and with new difficulties emerging across Europe there is a shadow over the worldwide economy at the moment.
It does seem that investors are becoming more and more cautious about the UK property market although much of this is probably based upon the fact it has done so well in recent times. However, there is a growing concern regarding not only the European economy but the worldwide economy which could prompt some investors to sit on the sidelines during the early part of 2015.