House price growth will me marginal in 2006, says HBOS |
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Thu, 22 Dec 2005 17:25
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LONDON: House prices may go up by a marginal 3 per cent in 2006, indicating a subdued property market through the year, says mortgage lender HBOS. Its economic forecast said the average cost of a house in the country will just keep in line with inflation during the year. In real terms, there will be hardly any change.
The prices may go up to a maximum of 7 per cent to 8 per cent during mid-year.
HBOS also predicted that growth in earnings will outstrip the growth in house prices as average salaries will increase by 4 per cent, a factor that will help to reduce the price-to-earning ratio, which stood at a peak of 5.6 in mid-2004 to 5.4 by end-2006. First time buyers will find it easy to acquire homes then.
Explaining the possible trends, Halifax's chief economist Martin Ellis said the market is set for a period of stability and the forecast rise of 3 per cent will be broadly in line with the predicted rise in retail price inflation.
HBOS said house price growth will slow down in most part of Wales, Scotland and Northern Ireland, where it is still in double digits. In Northern Ireland, where the current growth is 16 per cent, it will come down to 5 per cent, while in Wales it will be 3 per cent against the prevailing 14 per cent. In Scotland, it will drop to 7 per cent from 10 per cent.
It will be subdued growth in the south -- just 1 per cent in south-west, 2 per cent in south-east and no change in East Anglia.
HBOS said by the end of 2006, average price of property in the south would be just 1.5 times more than the average price in the north. Presently, it is 1.6 times more.
Ellis said council tax and utility charges are expected to rise well above the inflation rate in 2006, which may lead to rise in the non-mortgage related housing costs above the current 66 per cent of total housing costs. This could add pressure on household finances, more than offsetting the benefits of lower mortgage rates.
Meanwhile, the Royal Institute of Chartered Surveyors said buy-to-let investors will drive the housing market in Northern Ireland in the next six months with property values increasing by 10 per cent. RICS said confidence in the buy-to-let sector -- particularly at the entry level -- will fuel house prices through the spring and summer.
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