House prices increase by over 300% in Bournemouth over the last 20 years

It’s no secret that London and the South in particular have seen some very significant house price increases, both historically and at the present time. But just how much exactly has this been in Bournemouth, and what could we expect to see in the future?

Now I have to admit, I don’t have a crystal ball which tells me the future, nor am I very good at reading the stars – especially with all of these clouds floating around the sky at the moment. Even if I could, I still wouldn't be able to tell you exactly what is going to happen to the property market in the future, no one could. Having said that, there are ways to predict what is likely to happen using previous data trends and having a look at what is happening in the economy on both a local scale, and across the world. By giving you this information, it will put you in a stronger position for making more informed decisions. House prices will always fluctuate in the short term, but it’s what happens over the long term that is important to us if you are holding property.

According to house sales price data (opposed to asking price data which can sometimes be slightly misleading for obvious reasons) those owning a property in Bournemouth for the last 10-20 years could be in for a real surprise. In fact on average, properties have rose by over 300% between 1995 – 2015.

As expected, detached houses have seen the largest increase, 366% over the period. This is followed by Semi-detached houses at 360% and Terraced houses at 331% What is really surprising is that even flats saw a staggering 267% increase in value. A lot of the increase around flats is driven from demand caused by the growing population of 18-25 year olds over the past 10 years.

Now for those of you who have held your property for 10-20 years, I hope you didn’t spill your coffee in all the excitement. The market has grown at a considerable rate, but what is the next few years going to look like? Instead of plucking numbers from the air, let’s look at what influences there are at the moment on the market.

First of all, supply and demand. It is perhaps one of the most fundamental concepts of economics and it is the backbone of a market economy. Bournemouth council has estimated a current shortfall for affordable housing of 4,974 properties per year which is an increase of 60.06% since 2007. That is a massive demand of local housing, and one of the key reasons for the explosion of growth in the private rented sector to provide this housing, and the house price rises as a result of high competition to buy.

So we have the demand, what are the potential blockers to house price rises over the next few years?

Interest rate rises have been discussed continuously since 5^th March 2009 when the Bank of England took the dramatic decision to chop interest rates to 0.5% the lowest in more than 300 years. If (when) it rises, it is expected to cause some big issues for those looking for mortgages to fund their house purchase. So when will it rise? Not yet says Mark Carney, head of the BoE, effectively ruling out any increase this year. With this recent announcement, I cannot see there being any real impact on the housing market caused by potential interest rate increases this year.

Many tax changes have been announced last year, what impact are they going to have? Stamp duty increase of 3% on those with more than 1 property is the first of the changes. My opinion is that it will not impact the market in any real way. Potentially it could affect a few property investors who will need more money upfront to cover the increased purchase costs, but this will be minimal and will be more on the higher end market. The other tax change proposed involves mortgage interest relief being set to a maximum 20% This will be phased in over time and will not take effect until April 2017. I will discuss the effects of this in more detail at a later date, once we know the full details of the changes. Overall though, the tax changes will have minimal effect on the prices of properties in Bournemouth in my opinion.

I think the biggest potential impact could come from immigration should England leave the European Union. There are around 87,000 EU migrants that come to live in England each year, causing an additional demand of around 46,000 households, according to data from the Department of Communities and Local Government (DCLG). This is a substantial proportion of the overall demand for housing in the UK, around 20% of the shortfall estimates. It would be difficult to estimate the real total effect of a withdrawal from the EU, and at the moment it is all speculation. Some experts have commented that the impact will be very small due to the type of housing immigrants tend to go for.

So what does the near future hold? A 5 year future forecast from Savills shows a growth of 19.9% in house prices, higher than London which is estimated at 15.3% and UK at 17% This is considered conservative given many experts believe 2016 alone will generate a growth of over 8%

Overall the next few years look very bright for property owners and investors in Bournemouth. The continuous high demand for housing continues to push up the price of housing, with any potential blockers to this being very minimal.

I hope you have found this article useful, please do get in touch if you would like to discuss further. Give me a call on 07979123970, an email at luke.marchbanks@belvoir.co.uk or pop into the office for a coffee.

All the best

Luke