Rightmove triples house price forecast to 6%
Leading online property group Rightmove has tripled its housing market forecast, leading to further fears the property market is overheating.
At the start of the year, the group initially forecast that house prices in the UK would rise by 2% in 2013. In July 2013, it raised that forecast to 4%.
Today, Rightmove raised its prediction once again - this time to 6%. If correct, it means house prices are rising at double the rate of inflation.
Rightmove director Miles Shipside said: "We forecast the national average increase in new seller pricing for the whole of 2013 to be in the region of 6%, partly driven by the strength of southern markets but increasingly contributed to by the more buoyant areas of the north."
Shipside also forecast an "autumn price surge" as home-buyers return to the market with greater confidence.
The recovering property market is being fuelled by government housing aid packages such as Help to Buy and Funding for Lending, with prices rising particularly fast in London and the south east.
Last week, the Royal Institution of Chartered Surveyors (RICS), said house prices increased at their fastest rate for seven years in August 2013, while recent Bank of England figures show mortgage lending has reached its highest level since 2007.
Estate agent haart today said that the number of first-time buyers has increased by 75.7% annually, and in London the number has more than doubled - up 102.4%. Paul Smith, chief executive of haart, said: "The underlying "property bubble" niggle remains, though the distinct difference this time is that lending is more responsible. It is highly unlikely that we will see a return to the 100% LTV mortgage and extreme sub-prime market."
The Bank of England's financial policy committee will meet this week to discuss whether a property bubble is developing and, if so, what it can do to avert it - Rics has lobbied the Bank of England to cap annual house price growth at 5% a year.
But while business secretary Vince Cable has warned of the risks of an "out of control" housing market, David Cameron and Nick Clegg have dismissed fears that the government's Help to Buy scheme will add to the bubble. The second part of Help To Buy launches in January 2014, and allows people to buy homes valued at up to £600,000 with a 5% deposit.
Just 2% of consumers fear the housing market is overheating, according to a survey conducted by the Building Societies Association. When asked what one word they would use to describe the housing market now, one in five people said "recovering". A further fifth said the market is "stable" and just 1% described the current market as "crashing". The BSA said this is a strong indication that market sentiment has improved.
Recovery not bubble
Jonathan Hopper, managing director of Garrington Property Finders, said: "What we are seeing is definitely a recovery rather than a bubble. In a number of parts of the UK, a continued lack of supply of fresh property to the market together with rising purchaser demand and confidence is fuelling price rises, and indeed is likely to do so for the rest of this year.
"Some parts of London are a bit ‘frothy', with the influence of international buyers, and it remains distinct from the wider national market, however the froth blows off easily to leave the real deal of recovery just underneath.
"Across the UK buyers are upbeat, but they are not getting carried away. The market's return to health is steady and if Rightmove's forecast of an annual asking price rise of 6% is correct, then the fence will quickly start to hurt for those still sitting on it.
"The property market depends on confidence, and confidence amongst buyers right now is as high as it's been for a number of years. The key now is ensure that this recovery is sustained, but at a healthy rate. We don't want the horse to bolt."
All sub-prime financial products are aimed at borrowers with patchy credit histories and the term typically refers to mortgage candidates, though any form of credit offered to people who have had problems with debt repayment is classed as sub-prime. Depending on the lender’s own criteria, sub-prime can apply to borrowers who have missed a few credit card or loan repayments to people who have major debt problems and county court judgments (CCJ) against their name. To reflect the extra risk in lending to people who have struggled in the past, rates on sub-prime deals are typically higher than for “prime” borrowers.
An increase in the general level of prices that persists over a period of time. The inflation rate is a measure of the average change over a period, usually 12 months. If inflation is up 4%, this means the price of products and services is 4% higher than a year earlier, requiring we spend and extra 4% to buy the same things we bought 12 months ago and that any savings and investments must generate 4% (after any taxes) to keep pace with inflation. Since 2003, the Bank of England has used the consumer prices index (CPI) as its official measure of inflation (see also retail prices index).
Everything you own: all your assets (property, cars, investments, savings, insurance payouts, artwork, furniture etc) minus any liabilities (debts, current bills, payments still owed on assets like cars and houses, credit card balances and other outstanding loans). When you’re alive this is called your wealth; when you’re dead, it becomes your estate.