House prices will soar across the UK by 7% next year as the Government's Help to Buy scheme and the improving economy transform the country's property market, according to Knight Frank’s latest UK housing market forecast.
Liam Bailey, global head of residential research at Knight Frank, said: "For the first time in five years we can be broadly positive about the UK housing market." Bailey commented that the Government's Help to Buy scheme had had a "dramatic effect" on the market, adding that “at the same time, the UK economy has been growing more strongly than most economists had expected."
Improvement on last year’s predictions
Knight Frank predicted a 7% rise in average house prices next year across the UK, a jump of £12,000 to £185,835. The new projections come as a contrast to this time last year, when Knight Frank was predicting house prices would fall by 2% in 2013. Now, the estate agent expects prices to end the year up 7%, matching the predicted growth rate for 2014.
Slower growth predicted from 2016 as Help to Buy Scheme ends
However, this rate of growth is not predicted to last indefinitely. Knight Frank predicts that price growth will slow down as the Help to Buy scheme comes to an end in 2016. Bailey cautions that “There is however a flip-side to these improvements. Rising prices in the short term will limit longer term growth. The fact remains that pricing in the UK is high in historic terms, and while the Government can encourage activity over the next two to three years, it cannot change the fundamentals surrounding market affordability, especially as low interest rates and Government interventions start to unwind.”
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