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The RICS has unveiled its annual predictions, announcing that it expects UK house prices to grow by 7%. However, it's doom and gloom for first time buyers, as affordability looks set to worsen in 2007. Predicting a small slowdown from last year's 8% growth rate, the RICS expects activity to remain high with demand outstripping supply. (Good news for sellers then!)
Interest rate rise?
The Bank of England's recent interest rate hikes, could help to cool the market in the immediate future - although long term market conditions will remain healthy.
Repossessions will rise as affordability conditions worsen, but the overall strength of housing demand will limit the negative impact on prices.
This contrasts with experiences in the early 1990s where house prices dropped following sharp interest rate rises.
RICS believes that some commentators have overplayed the role of buyer expectations in house price gains.
Strong economy saves property market
The market is not in danger of correction, as factors such as the economy and the strength of the job market have a far stronger short-term impact on the market, with buyer expectations taking a long-term view.
A slowdown in the housing market will not aid affordability or accessibility for first-time buyers as prices continue to outstrip incomes.
RICS expects London, the South East, Scotland and Northern Ireland to outperform national average house price increases in both 2007 and in the next five years.
RICS economist David Stubbs said: "The strength of the market this year has been surprising.
Indications are the market will retain significant momentum through the first half of 2007 due to solid economic growth and rising employment.
The bleak outlook for first-time buyers looks set to darken further as house prices rise faster than incomes and Government holds the stamp duty threshold at £125,000."
The increasing gloom for those trying to get on the property
ladder won't have significant impact on the housing market
as demand remains strong, disposable income is growing
and buy-to-let investors are a substitute for the first-
