What
happens to house prices affects everybody's pockets - not just
homeowners. This year, 2005, has seen the property market stabilise
after years of rampant price rises - but what's likely to happen in
2006? We take a look. Whether
you're already a homeowner, or hope to become one in 2006, what goes on
in the property market can seriously affect you. Price increases
encourage many homeowners to release equity from their homes to spend on
home improvements, while a flatter market means first-time buyers can
get on the property ladder.
How the property market performs is closely linked to the
fortunes of the economy, particularly unemployment levels and interest
rates. So, what does 2006 have in store for the value of our homes?
Will prices hold steady?
Generally, pundits are predicting a period of stability.
"The economy is fairly stable and I expect this to continue through
2006," says Fionnuala Earley, group economist at Nationwide.
"I don't expect big changes in unemployment levels and as long as
people are in work, they feel more confident about property."
And although unemployment levels rose slightly towards the end
of 2005, so did employment levels, and this will help to keep the
economy stable.
Interest rates are also predicted to remain fairly stable. The
Halifax doesn't expect any changes to the Bank of England base rate in
2006 and although some experts predict a further cut or two of 0.25%,
this is only likely if the economy shows signs of slowing.
Forecasts for property prices in 2006 echo this stable economic
outlook. Both the Halifax and Nationwide expect prices to grow by just
3% during 2006. "A flat year in 2005 has allowed some first-time
buyers to get into the market but affordability does still remain an
issue," says a Halifax spokesman.
Others are slightly more optimistic. "We forecast rises of
around 5% for UK property prices in the first half of the year, although
we believe that this is set to cool down, leaving annual growth between
2% and 3%," says Paul Smith, chief executive of Haart estate
agents. However, that is an average, so property prices in some
regions will grow while others slide back.
Last
year in 2005 property price predictions from the experts varied by
many percent. The fact of the matter is that they are not sure and
whilst edging their bets many property experts that give out property
figures do have a vested interest one way or the other and can massage
statistics to suit their requirement. Seeing the Housing market
waiver, many first time buyers sit on the fence, especially if the
have the option to rent, house share or stay with family and save a
deposit whilst not commiting to a purchase which may turn out to be at
an inflated price when the fall in prices which they hope for is
around the corner.
Property
predictions for 2006 seem at the moment to be closer to the mark, that
is a short upturn at the beginning of the year but a fairly flat year
overall. Government encourages the economy and is fearful of a
return to negative equity so that is very unlikely, however much hoped
for by first time buyers waiting it out and those hoping to get a
bargain.
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