According to a new housing market forecast report from property services company, Hamptons International, the UK housing market will experience double digit growth in the next three years, bringing the number of transactions back above one million by 2016.
Unlike house prices, the level of property transactions is the most accurate indicator of the strength of the housing market.
This predicted growth in transactions will pave the way to a healthier property market. The new build sector will also support transaction levels but with only about 10 per cent of transactions coming from new build completions, returning sellers will be the most important driver.
“The fixation with house prices as an indicator of housing market recovery is misplaced,” said Fionnuala Earley, Research Director at Hamptons International. “Transaction levels are a far superior indicator of housing market health. A liquid and active market is the key to avoiding volatility and to ensuring a stable and sustainable housing market in the UK.”
- Transactions will grow year on year for the next three years breaking the one million mark in 2016 with projected growth of 50 per cent between now and 2018.
- The uplift in activity is due to improved confidence built on economic recovery and Government stimuli such as ‘Help to Buy’ and ‘Funding for Lending’ initiatives.
- House prices in England and Wales will increase by 6 per cent in 2014 and by 24 per cent in the next five years.
- House prices in Central London will grow the most in 2014 at 8 per cent and by 32 per cent over five years.
- House price growth will slow in Prime Central London (PCL) to 3% in 2014 but extreme supply shortages mean that over the next five years PCL will still see 20 per cent growth.
The housing market forecast report, that predicts transactions and house prices for the next five years, is based on national economic and house price data, and provides a national view.
Property Transaction Forecasts
| | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 |
| Great Britain (000s) | 734 | 800 | 880 | 970 | 1,070 | 1,070 | 1,100 |
Source: HMLR, Register for Scotland and Hamptons International
2014 Housing Market Forecast Assumptions
- The UK economy will continue to recover.
- Wage growth will be modest for some time.
- Unemployment is unlikely to fall rapidly.
- Inflation will stay above its two per cent target for some time.
- Conditions in the US and Europe continue to improve.
- ‘Funding for Lending’ and ‘Help to Buy’ will remain in place for the planned period (until 2015 and 2017 respectively).
- Mansion Tax will not come into force in this forecast period.
- The Financial Policy Committee and the Prudential Regulation Authority will monitor and restrict risky lending.
2014 Housing Market Forecast Downside Risks
- Turmoil in the US could destabilise the world economy at a fragile time.
- Unrest in oil producing countries could cause a spike in oil prices and result in an early hike in interest rates.
2014 Housing Market Forecast Upside Risks
- Global economic conditions could improve more rapidly and allow faster job creation.
- A faster, balanced economic recovery would consolidate a more sustainable housing market recovery.
