House Prices Set to Increase BY 10% This YEAR!

1st June 2003

T. Wyn Jones

Recent comments by what is held to be the authoritative source on property indicates that house prices look set to increase by 10% this year despite evidence that the market is slowing down.

The Royal Institution of Chartered Surveyors expects house price inflation to be 10% during 2003, as low interest rates and the end of the war in Iraq help boost the figures, with growth forecasted to slow to just 5% during 2004. What is interesting is that the figures for the south east of England are considerably lower than those forecasted for the rest of the UK.

The Institution stated that during the first part of 2003 there had been growing evidence of a slowdown in the market, with prices rising by just over 4% in the first quarter of 2003, almost half the pace of growth during the second half of 2002. But despite evidence of a slowdown it found that affordability still remained stretched.

House prices had risen sharply relative to national average earnings in recent years, putting the ratio of house prices to incomes at five during the first quarter of 2003, compared with a long-run average of 3.5. Further, it stated that given the "extraordinary heights" prices had reached, they would have to fall by 30% to return to historical norms, although it added that this did not look likely in the near future.

This increase in house prices (Shropshire, West Midlands and Mid Wales seeing some of the greatest increases) begs the question how does Local & National Government counteract the increasingly out of reach housing market for large sections of the population, particularly among essential public sector staff such as nurses, teachers and fire-fighters and those people located in a rural county and on a relatively low wage.

The rising inequality of income (resulting in second homes and the like) coupled with the low levels of house building only make matters worse.

While the housing market is providing a healthy investment for some, with house prices expected to continue to rise in 2004, many first-time buyers, particularly public sector workers, are unable to save the substantial deposit required to bridge the ever widening financial gap.

And you know what? I can see it only getting worse in this neck of the woods.

Wyn Jones is a partner of McCartneys, Property Agents and operates from their Ludlow, Tenbury Wells & Cleobury Mortimer offices. For further information on Property Matters he can be contacted on Tel 01584 872153 or wyn@mccartneys.co.uk