Prices are expected to rise by a further 11.5% to £235,500 in 2017, due to a boom in credit, and sharp rises in GDP and inflation, putting pressure on the Bank of England (BoE) to restrict mortgage finance.
If base rate rises late next year instead, the average house price growth would be slower, increasing by 4.4% in 2016 and by 6.9% to £220,116 in 2017.
Adrian Owen, head of residential at BNP Paribas Real Estate, said: “While on the face of it a deferral would be good news for home owners, we believe this scenario is a cautionary tale for the UK economy as a whole.
“There is already concern at the Bank of England over the pace of house price growth and while the current lack of housing supply is a significant driver, the sustained low cost of finance is also a major contributor.”
He added that even when assuming base rates will rise, it is likely that the BoE will instruct further restrictions to lending in the aim of slowing down a growth in house prices.
“This may achieve the desired dampening effect, although does not address the underlying structural issue in the market of insufficient supply. The 3% levy on SDLT (Stamp Duty Land Tax) for additional properties will, however, release supply in some submarkets.”
The research estimated the new SDLT surcharge would have little national impact. Instead, it would dampen house price growth in regional town centres and in the capital.
In London, the growth forecast has been reduced from 5.6% to 4.7% in 2016, with the average home being worth £468,893 – around £5,000 less than previously predicted.
While Owen said this will add to the problems in the capital’s housing market, he added that this could be great for first-time buyers who have to save much less in order to keep pace with prices.