UK house prices are set to rise by only 3% to 5% in 2015, with the looming general election likely to cause a lull in activity early next year, according to Britain’s biggest mortgage lender.
The Halifax said the prospect of higher interest rates at some point in 2015 was also likely to play a part in dampening demand.
The lender expects UK property prices to end this year up around 8%, though it acknowledges this is very much at the top end of the 4%-8% forecast it issued a year ago. It believes annual price inflation probably peaked at around 10% in July.
“A further moderation in house price growth is likely in 2015 as supply and demand become increasingly better balanced,” said Martin Ellis, the Halifax’s housing economist. Despite the downward pressures, the market was likely to be helped by a continuing economic recovery, growth in employment and still low mortgage rates.
“Overall, house prices nationally are expected to increase in a range of 3-5% in 2015,” he said.
“The prospect of higher interest rates at some point in the year and reduced affordability are expected to be key factors curbing housing demand. A looming general election could also raise uncertainty, resulting in a lull in activity in the early months of the year.”
Some property commentators have described London as being in the grip of a pronounced slowdown in market activity in recent months, and while Ellis said he was not gloomy about the capital, he thought the pace of growth there would slacken.
“Global economic worries could also reduce demand and activity at the top end of the London market in 2015,” he said.
Other firms and commentators that have announced their predictions for 2015 include property company Savills, which forecast that the UK market would see a 2% rise in house prices in 2015. It believes the London market will be flat next year. Howard Archer, an economist at IHS Global Insight, said he expected property values would rise by around 5% in 2015.