House prices to rise 10% in 2014 to reach the peak levels seen in 2007

In February this year house prices were 9.4% higher than they were in February 2013. These increases continue to be driven by a shortage of new homes, as still only 50% of the increased demand is being met by new build.

However, house prices are still 10% lower than the peak in 2007! Growth in the economy is predicted to be 2.8% for 2014. This growth in the economy combined with falling unemployment and renewed confidence, will create an improved feel good factor which will continue to put pressure on the demand for houses, so I predict a further 10% increase this year! A quick look in any estate agents window will tell you that properties are selling, and the general shortage of available homes on the market is self evident. In addition this is not just restricted to the lower end of the market but appears to be right across the price range.

So what about first time buyers?

In the forth coming budget I predict that the stamp duty threshold will be raised to £175,000! The average price paid by a first time buyer is £155,852. The average deposit having to be paid by a first time buyer is £27,500, plus on top of this they are currently having to pay 1% stamp duty of £1,558. Therefore first time buyers need savings of close to £30,000 in order to get on the property ladder, unless they seek help from family or the Government’s Help to Buy Scheme. Stamp duty on houses has been a good source of income for the government, last year they collected £2billion more than was collected in the year that they came to power! So they can afford this gesture to help first time buyers.

New mortgage rules

On April 26th new mortgage rules apply. Following the Mortgage Market Review (MMR) new affordability checks for borrowers take effect. This will impact on the speed and the number of new mortgages that will be available and will have an effect on the market. Despite the inevitable delays that will occur due to the new mortgage rules I still believe house prices will continue to increase right across the country.