House prices in the UK will see an increase of 8% over the course of next year while the cost of renting a home should rise by a further 2%, according to RICS annual housing market forecast.
This growth is being driven by the acute imbalance between burgeoning buyer demand and sluggish supply with new instructions to estate agents close to stagnating.
Although significant challenges remain to achieving a sustainable economic recovery, 2014 may well see the nascent pick-up in activity gather pace and this will be reflected in the housing market. In addition to rising prices, the number of transactions should also see a further increase, moving up to 1.2m (from 1.05m in 2013). Although this represents an improvement, to put this in context, total sales in 2006 were well above this at 1.67m.
With the shortage of homes coming onto the market a key factor behind the price rises, some comfort may be drawn from a likely 20% jump in new starts in England over the next year. That would push the total towards the 155,000 mark compared to 125,000 this year and only around 100,000 in 2012. While this is an encouraging trend, it is still insufficient to address the more rapid growth in population and will leave significant shortfalls in all tenures.
Across the UK, all parts of the country should see prices rise next year. Predictably, the biggest increases are to be seen in the capital, where the cost of a home will jump by around 11%. It remains to be seen what impact the recently announced increase in capital gains tax for overseas vendors will have on the prime central London market. Meanwhile, the North East and Northern Ireland will experience the lowest rises with prices increasing by 5% and 4% respectively.