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London Housing Prices Set to Increase By 5% in 2016

London House Prices

The increase in housing prices in London is far from over. A new study from the Royal Institute of Chartered Surveyors predicts they will rise 5% next year. Rents are also estimated to rise, by an average of 6% each year for the next five years, outstripping any commensurate rise in household incomes.

This forecast confirms the trend of housing prices growth in the UK capital, making homes less affordable for most people, whose average pay is rising less than 3% per year.

Together with the welfare cuts, the housing prices and excessive increase in rents have already pulled over 50,000 families out of London in the past three years, reports The Independent. Moreover, Generation Rent is a by-product of the housing bubble. Generation Rent is the name given to people born from the 1980s onwards who unlike previous generations, cannot afford to buy their own homes. According to the ING International Survey on Homes and Mortgages 2015, in the UK, 23% of tenants difficult or very difficult to pay the rent, and among those who do not, 52% admit it is expensive. The same research states that 89% of English people thinks that for newcomers to the housing market, it is increasingly difficult to buy a house. Finally, 57% of homeowners and 75% of tenants believe that it would be good for society if house prices fell.

The upward trend of housing prices is partly due to an accommodative monetary policy in the UK, designed to spur growth. At the same time, low interest rates push up the value of property because they make it cheaper for people to borrow money to buy a house. In spite of this, interest rates are set to increase in 2016, while housing prices will keep on rising. Indeed, low rates are not the only thing responsible for the housing market bubble in the UK. Prices are under pressure due to a housing supply shortfall, says the RICS study. The research reveals a “there have simply not been enough properties coming back to the market to replenish the stock sold”, despite the increase in the volume of homes completed after the recession.

About the author

Valentina

Economics and business blogger, specialized in labor issues. She aims at making business and economics accessible to everyone with web and clarity.

  • Dmitri Kara

    I’ve been working with London landlords and tenants for about two years now and after everything that happened lately, especially Brexit, housing price are something I could not predict at all, but I would certainly that tenants will have to spend more and more on their lease. As an end of tenancy cleaning technician I meet housing landlords on a daily basis, and for what I can say is that things are yet about to worsen with London tenancies. The rising restrictions and legal responsibilities landlords have, are ever more reflecting on tenants, and respectively, the whole niche and all involved in it, like Fantastic cleaners is.

    • Charline Ticktickcheck

      It’s absurd how fast have prices jumped!