House prices are expected to peak next year, according to research by a group of economists.
The Economic Research Council has calculated that property values will continue to rise into 2015 and then start to slowly fall until they steady sometime in 2019.
By then, the average price of a home in England and Wales is expected to level out at around £212,000 – compared to the current £260,000 put forward by official figures from the Office of National Statistics (ONS).
The latest ONS study says prices have increased by 9.9% in the past year.
The Economic Research Council asked three property experts about their views on how prices may change over the coming years.
All three agreed the peak and plateau theory.
Gráinne Gilmore, of international property consultants Knight Frank said: “From April 2015 interest rate rises will start to impact on the rate of price growth as mortgages become more expensive”
James Wyatt of property firm Parthenia considers that the forthcoming general election followed by the ‘aftermath of confronting the reality of trying to reduce the national debt’ is why growth will peak in 2015.
Matthew Pointon of Capital Economics added: “Tight market conditions will lead to further house price gains over the next few months and robust economic growth this year and next, alongside a rise in real earnings, will push prices up further in 2015.
“House prices are already high in relation to earnings, and as interest rates gradually edge up from the second half of 2015 the pace of gains will slow. Our central forecast is for a long period of stable house prices as earnings catch-up, but a sharper correction – perhaps caused by a faster-than-expected rise in interest rates – is still a risk.”
The June ONS report looking at house prices in May, announced prices are rising strongly across the country, but with London and the South East leaving the way.
Stripping the capital out of the national figures, values in the rest of England and Wales rose by 6.3%, while London saw increases of more than 18%.