- House price index rises; no easing in supply constraint
- Prices expected to rise by 4.5% per annum for next 5 years
U.K. house prices continued to climb in October and long-term projections suggest it’s going to get even harder to get on the property ladder, according to the Royal Institution of Chartered Surveyors.
In a monthly report, RICS said its index of house prices rose to 49 in October from 44 in September as demand outpaced supply. A measure of new instructions to sell declined to minus 10, while a gauge for new buyer inquiries dropped to 12.
“It is hard to get away from the issue of supply when it comes to the current state of the housing market,” said Simon Rubinsohn, chief economist at RICS. “The legacy of the drop in new build following the onset of the global financial crisis is now really hitting home.”
Rubinsohn also said property is set to become “even more unaffordable,” citing five-year projections from RICS members on the outlook for home prices and rents. Values are forecast to rise 4.5 percent in each of the next five years, which would amount to cumulative growth of 25 percent, RICS said.
The housing market has been strengthening because of low borrowing costs, rising employment and real wage growth. Pressure is piling on the government to address the the supply shortage, with economists at UBS Group AG warning that London house prices are especially at risk of a substantial fall if the fundamentals for real estate investment deteriorate.