Up and up go house prices

For Sale signs: the only way is up for house prices in 2016, according to property experts.
For Sale signs: the only way is up for house prices in 2016, according to property experts.

The housing market hit new records in 2015, so what will 2016 bring?

The average house price across the UK reached an all-time high of £287,000 in October 2015, according to the Office for National Statistics (ONS). And with the supply of properties for sale still reported to be tight, market experts expect prices to climb further in the coming months.

A three percentage point stamp duty increase for buy-to-let investors is also set to come into force in April, which could also see housing market activity ramped up as investors rush to beat the deadline.

However, there could be a bit of a ray of light for aspiring first-time buyers, who may potentially find that after April, they face less competition from investors for properties.

Meanwhile, there’s been recent speculation about interest rates - with suggestions that 2016 could be the year rates start to edge up.

So for how much longer can we expect the ultra-low mortgage rates that we’ve become used to in recent years to stick around?

Here are some experts’ views on what could be around the corner for the housing market:

:: David Hollingworth, spokesman for brokers London & Country Mortgages, says: “House prices generally increased during 2015, largely due to strong demand from buyers and not enough property coming to market to satisfy that demand.

“Although the Government has put a focus on stimulating the building of more new and affordable housing, which should help over time, it will not be a quick fix. Therefore it’s hard to suggest that prices will not continue on that trajectory with further rises to come in 2016.

“However, it’s also likely that the regional variation in house prices will continue, given that London and the South East has increased much more strongly than elsewhere in the UK.”

Hollingworth believes the stamp duty increase for investors could have a “stalling effect” on the market when its impact starts to be felt. He says: “Although there is likely to be a rush to complete any transactions in the first quarter, it’s not known how hard activity might be hit after April.

“In theory, that should be music to first-time buyers’ ears as it could (mean) less competition from buy-to-let landlords.”

Any increase, he adds, in the Bank of England’s base rate, which is currently at a record low of 0.5%, is likely to prompt a spike in people looking to re-mortgage. “I expect lenders will be competing hard for business from the off in January. If rates do climb then it is likely to be slow and gradual, so borrowers should largely be able to cope, but fixed rates are very competitive at the moment and offer protection against any future rises.”

:: Sarah Beeny, TV property expert and owner of estate agent Tepilo, says of the stamp duty hike for buy-to-let investors: “It will undoubtedly affect the market as it will increase the costs associated with buying for investors, and they’ll really need to work out their figures before considering buying a buy-to-let property.”

Beeny says the stamp duty increase on investment properties “will help to slow parts of the buy-to-let market down, particularly the entry level market, which is where first-time buyers sit and where a lot of investors invest in”.

“This will hopefully help slow down prices,” she adds, “and make them more affordable and more in line with earnings.”

:: The Royal Institution of Chartered Surveyors (Rics) expects house prices across the UK to increase by around 6% annually in 2016 - with values jumping higher across all regions.

Rics expects house prices to see an annual increase of 8% in East Anglia, 7% in South East England and the West Midlands, 6% in Wales, North West England and Yorkshire and Humberside, 5% in Northern Ireland, London and South West England, 4% in Scotland and the East Midlands and 3% in North East England.

Simon Rubinsohn, chief economist at Rics, says a lack of stock will continue to be the “principal driver” of house prices pushing upwards.