There are a number of factors affecting the future of private housing in the UK for the year ahead, says Glenigan.
The impact on the economy of government spending cuts, the level of inflation and the Bank of England’s resolve to forsake economic growth to keep it under control are the major influences. In addition, consumer confidence will affect the house market in the short term, which has begun to stagnate over the winter.
How the house market performs as the year continues will be very dependent upon monetary policy. As things stand, the CPI measure of inflation stands at 3.7%, well above the Bank of England’s 2% target.
So far, the Monetary Policy Committee, who set interest rates, has shied away from raising rates out of concern for fragile economic growth. However, if, as anticipated, inflation remains above target, it is likely that rates will rise before the end of the year.
If this was to happen, it would hit borrowers, negatively impacting upon house prices. In a similar way, it could also hit house builders who rely on access to affordable credit to fund their developments.