As ever, the experts cannot agree on how the housing market fared in 2005. The Halifax believes UK house prices rose by 5.1%. At the other end of the spectrum, the research group Hometrack reported a 1.6% fall. Nationwide said prices ended up 3%. When it comes to 2006 predictions, the Halifax is broadly in line with its rivals. It has forecast a 3% rise; the Nationwide predicts growth of 3% at best. Property website Rightmove has pencilled in 4%, while Hometrack has gone for an increase of "just over 1%".
Predictions for 2006Here is a good summary from the BBC
Halifax, the UK's biggest mortgage lender
2006 overview:
The bank says housing market fundamentals are "sound" but price growth is likely to remain below the long-term trend in 2006. Overall, house prices will not rise as fast as average wages, which should make property more affordable. Robust growth in average earnings - predicted to be close to 5% - as well as cuts in interest rates will combine to prop-up the housing market and prevent any slide in values.
Did it get it right in 2005?
No, it predicted a small fall in prices. The market proved a little more robust than predicted due to high levels of employment and continued economic growth.
Regional winners and losers?
The north/south divide will narrow further during 2006, the bank predicts. Modest price rises in Scotland and Northern Ireland are predicted while prices should stagnate in the south east and east Anglia.
Nationwide, UK's biggest building society
2006 overview:
The Nationwide reckons the UK economy will recover next year and as a result there will not be a collapse in house prices. Overall, the society says it is "cautiously optimistic" about prices. But the society warned that year-on-year house prices may fall in early 2006, compared to strong growth in early 2005. The group added that it thought buyers and sellers were now accustomed to lower levels of house price inflation and as a result it was becoming easier for both parties to agree sales.
What is its forecasting track record?
Pretty good, of late. The Nationwide predicted annual UK house price inflation would be about 2% in 2005. In November 2005, the society said annual house price inflation was 2.4%. However, looking further back to the boom years between 1999 and 2004, house price inflation often exceeded the Nationwide's growth predictions.
Hometrack, a property research company
2006 overview:
Hometrack is a guide to current prices. Data is collected from 3,500 estate agent offices from all 2,200 postcode districts in England and Wales. The estate agents report whether asking prices are rising or falling.
Prices should rise by 1% during the course of 2006. The group said the market was being starved of first-time buyers as people in their twenties and even thirties simply do not earn enough to be able to afford their own home. Hometrack looked further into the future than the other forecasters. The group predicted that prices would increase by an average of 2.1% a year over the next three years.
"These low levels of house price growth will result in a steady re-alignment of household incomes and house prices to more sustainable levels," Richard Donnell, Hometrack's director of research, said.
What is its forecasting track record?
Hometrack has not been around very long to have much of a forecasting track record. Last year, though, the group said prices would remain unchanged, a prediction which seems only slightly wide of the mark as prices have fallen 1.57%, by its own estimates, during the year.
Capital Economics, independent economic research company
2006 overview:
Capital Economics believes that the UK housing market is still "fundamentally overvalued", despite price growth moderating in 2005. The group argues that house prices have raced so far ahead of wages as to make purchasing property unaffordable for many would-be first time buyers. Dangers lie all around for the housing market, the group argues. For example, a deterioration in the UK economy could lead to sharp house price falls as people lose their jobs and struggle to keep up with their mortgage repayments.
What is its forecasting track record?
Capital Economics is a long-standing housing market sceptic. The group has been predicting a sharp fall in house prices, starting in late 2004. Last year, they said prices would fall 7% as a prelude to a 20% decrease over three years. So far their predictions have not been proved right but Capital Economics is far from alone in saying that house prices are at an unsustainably high level.
Royal Institution of Chartered Surveyors, an industry body
2006 overview:
It expects steady growth during both 2006 and 2007. RICS said it expected prices to rise on the back of an increasing number of sales. The number of properties being sold fell dramatically between late 2004 and the first half of 2005. RICS said this trend had now halted and that it thought mortgage approvals - a key indicator of housing market activity to rise from a five year low of 1.127m in 2005 to reach 1.336m in 2006.
What is its forecasting track record?
Last year the surveyors' industry body called the market right, saying prices would rise by about 3%. RICS surveys its members to find what they think about the future direction of house prices. This can mean that it is early in flagging up moves in house prices.
