Today, the 18th of November, it was reported that inflation rates have risen by 0.1%, up to 1.3% in October 2014. The BBC’s economics editor, Robert Peston, explains that this is principally due to seasonal factors, such as the increases of student fees and sales of Christmas games. The Bank of England considers this as a positive step forward to achieving their targeted inflation rate of 2%. In fact their forecasts suggest that the 2% inflation rate will be reached towards the end of 2016. The Financial Times expects the same 2% mark to be touched by 2017.
Corresponding to this inflation figure, the ONS reports that house prices in the UK have grown by an astonishing 12.1% at the end of September this year, with England performing by far the best out of England, Northern Ireland, Scotland and Wales. A report by Savills suggests that 56% of the £37billion paid for rented accommodation in the UK was paid to private landlords. Savills furthermore states that that the issue of deposit affordability will remain constant in the future, leading to an increased amount of people struggling to step on the property ladder and hence continuing to rent. Statistics by the same report reveals that from 2014 to 2019 there will be 24.3%, or 1.2million, more private renters in the UK, preliminary from the age group under 35s, whilst the number of home owners is expected to decrease by 1.4%.
Figures from the ONS furthermore show that whilst house prices are still exceptionally high, wages on the national level have not caught up with accommodation prices, leading to an immense gap between actual income and house prices. As of September 2014, house prices are on approximately the same level as in July 2004, yet still 16% below its pre-credit crunch peak.
Whilst property markets in the North West, like Manchester for example, continue to improve, the capital’s residential accommodation market appears to come to a still. Savills suggest that although the inflation rate and home prices are rising in Britain, London will see no property inflation in 2016.