House prices will rise by 3 per cent next year — more than previously forecast — according to the the Royal Institution of Chartered Surveyors.
The RICS, whose monthly reports are closely monitored by the Bank of England and the government, said that the shortage of homes available meant prices would continue to rise.
The group said that despite “seismic changes” in the political and economic landscape, the shortfall of stock continued to dominate the agenda in the new and second-hand market.
It added that even with the recent improvement in the number of new homes being built each year, a legacy of building on an insufficient scale had left the stock on estate agents’ books close to a historic low. This has been compounded by far fewer transactions compared with the ten-year average before the recession. Sales are 24 per cent below the level before the credit crunch.
This is believed to be because more housing is now concentrated among older people who move less, and landlords who hold on to homes for an average of 15 years.
Advertisement
RICS members have also reported that while potential buyers have returned to the market after a sharp dip because of the EU referendum, sellers have mostly stayed away.
Simon Rubinsohn, chief economist at RICS, said: “The ongoing shortfall of stock across much of the sales and lettings markets is set to continue to underpin prices and rents. As a result, the affordability challenge will remain very much to the fore for many.”
Transactions are forecast to fall to 1.15 million or 1.2 million next year, down from the 1.25 million likely for the whole of this year.
The lack of new homes means house prices are predicted to rise across the country. East Anglia is due to continue its trend of house prices rising at a rate above the average, supported by huge levels of housebuilding occurring in Cambridgeshire, alongside the northwest and West Midlands. The most expensive homes in central London also look set to stabilise after recent declines of as much as 10 per cent, with support provided by the weaker exchange rate encouraging foreign buyers.
The forecast is in sharp contrast to dire warnings from the Treasury before the EU referendum.