Homes coming on to the market at record low, as Halifax predicts national increase in house prices by 4% to 6% in 2016

House prices in the UK are set to increase by between 4% and 6% in 2016, as increasing affordability problems and the prospects of an interest rate rise put the brakes on the property market, the country’s biggest mortgage lender has forecast.

Demand for property has increased in recent months, but the number of homes coming on to the market has remained at a record low. Surveyors and property websites have reported a shortage of properties for sale which is driving up prices, and described a vicious circle as potential sellers wait until there are more homes available before putting theirs on the market.

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In the first 2016 forecast to be published by a major lender, Martin Ellis, Halifax’s housing economist, said there was little reason to expect this pattern to change in the year ahead. “As a result, the substantial imbalance between supply and demand is likely to persist, maintaining upward pressure on house prices in 2016,” he said.

“On average, UK house prices look expensive compared to incomes but valuations are supported by the low levels of property for sale, low levels of housebuilding, and exceptionally low interest rates.”

However, Ellis said he did expect growth to fall from its current level. Halifax’s most recent monthly update of its house prices index put the average value of a UK property at £205,240 – 9.7% higher than a year earlier.

For 2016, he said national growth was likely to slow to between 4% and 6% – which at the top end would add more than £12,000 to the cost of buying – while in London the slowdown will be sharper. House price rises in the capital have already eased since the autumn of last year, when Halifax’s index was showing an annual increase of 21%. This autumn it had fallen to 13%, and Ellis said he expected growth to fall into single figures in 2016.

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Ellis said the national fall would be driven by the continuing affordability crisis, which has seen prices across the UK rise the equivalent of 5.31 times average earnings, and those in London reach a new high of 7.96 times. Although mortgage rates are at record lows, buyers are having to save more for deposits in order to get a loan.

“With house prices continuing to increase more quickly than average earnings, it is increasingly difficult to get on the housing ladder,” he said. “This ongoing development, combined with the growing prospect of an interest rate rise, should start to put the brakes on house price growth during the course of 2016.”



The bank’s monthly figures are based on mortgages it agrees each month, adjusted to reflect the sale of a typical house. Increases have outstripped the 3% to 5% predicted by the lender a year ago, the result it said of interest rate rises being pushed back, the continued fall in the cost of mortgages, and weaker than expected supply.

Beyond 2016 Halifax said it expected growth to be broadly in line with earnings, which have started to pick up in recent months. But much will hinge on whether the government’s recent promises to create more homes come to fruition. “Levels of housebuilding remain well below those required to keep up with the pace of household formation, but we do expect improvements over the medium term,” said Ellis. “An upward trend in housebuilding would help to bring demand and supply into better balance, helping to constrain upward pressure on house prices.”



Halifax’s prediction for 2016 is in line with that published by the Office for Budget Responsibility. It has forecast growth of 4.8% in 2016, followed by a similar increase in 2017. However, the OBR said changes to taxes paid by landlords added uncertainty to its predictions. Next April will see a surcharge added to the stamp duty paid on second homes, a move which will affect buy-to-let landlords and could lead to a flurry of activity before the change.