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Will you be able to sell property in 2006?
Simon Lambert, This
is Money, January 2006
PROPERTY predictions
come thick and fast at this time of year and the only consensus the
experts have reached is to agree to disagree.
House price forecasts from major industry players have ranged from
gloomy prophecies of falling prices to optimistic anticipation of a
relatively buoyant market ahead.
All
of the firms and organisations that issue figures on house prices have
their own vested interest and draw conclusions from different data.
But
regardless of the politics, what you want to know is has the market -
generally judged to have risen just 2% this year – run out of steam?
And what are the chances of selling your home in 2006?
To
give you a helping hand This is Money has pulled on its psychic hat and
reviewed the predictions, letting you know what to expect in 2006:
•
John Charcol – 5.5% increase
The
independent mortgage brokers issued the most upbeat prediction for house
prices in 2006, with expert Ray Boulger claiming there will be a bright
light at the end of 2005's relatively slow tunnel. He said interest
rates could be cut by up to 0.75% next year, helping to fuel house price
growth.
This
is Money verdict: Two years
ago predictions of a 5.5% increase in prices would have been seen as
cautious, but after a slow 2005 Charcol's forecast is seen as bold. If
Mr Boulger's crystal ball is to be proved right it will be demand in
Scotland
,
Wales
and the North most likely to deliver.
•
Royal Institution of Chartered Surveyors – 4% increase
Rics
reckons the property market had a soft landing in 2005, and predicts a
'modest' upturn next year of 4% and another 3% in 2007. It sees interest
rates cut by 0.25% and mortgage approvals rising from a five-year low
this year thanks to more affordable borrowing.
This
is Money verdict: Rics sees
affordability playing its part in keeping the market in steady growth.
If interest rates are cut again it will help people stretch their
mortgage repayments, but with average first-time buyer prices now £152,331
– almost seven times the average salary of £22,941 – people will
still struggle to get on the ladder.
•
Halifax
– 3% rise
Halifax
forecasts a steady property market in
2006, with prices rising broadly in line with retail price inflation.
The only areas it sees with growth pushing towards its long-term average
of 8% are
Scotland
(7%) and
Northern Ireland
(5%). The silver lining for the lender
is earnings growth, which it says will outstrip average price rises and
go up by 4.5%.
This
is Money verdict: If average
earnings rise more than house prices it will be good news for first-time
buyers. This eventually means good news for everyone else, as people at
the top of the ladder need more people joining at the bottom. The only
problem is despite low average growth this year of 2.2%, the Office of
the Deputy Prime Minister says first-time buyers' prices rose by 5%.
•
Hometrack – 1% rise
The
property research firm takes its figures from 7,500 estate agents across
Britain
and the industry normally known for its
bullishness claimed prices fell by 1.3% in 2005. Hometrack has predicted
a below inflation 1% rise that would see the value of people's houses
drop in real terms.
This
is Money verdict: You know
something has gone a bit awry when estate agents are talking the market
down. Their caution reflects the mantra reeled out in 2005 that sellers
need to realise they have to price their home realistically. If you want
to sell your home in 2006, set a sensible price that you will accept.
•
Nationwide – 0% to 3%
Britain
's biggest building society claims its
spot at the glass half empty end of the spectrum by saying prices could
remain unchanged – although by covering its bases and predicting up to
3% as well it could be considered mildly confident too. It said there
could be a marked increase in sales activity but does not see that
translating into rising prices.
This
is Money verdict: Nationwide
has kept its options open by suggesting between 0 and 3%. The lower end
of the scale will see real value lost through inflation, while the upper
end will see a slight gain, or value remain steady, if inflation targets
of 2% are met.
•
2006 property market winners and losers
Going
Up:
Scotland
Northern Ireland
Posh London addresses
Cheaper areas close to large cities
Three-bedroom family homes
Going
down:
One bedroom flats
Luxury homes at inflated prices
South West England
East Anglia
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