The outlook for the UK residential property market in 2014 is looking rosy with experts across the spectrum predicting further growth in the new year. But the key issue is that the growth that has been spectacular in London is set to spread out across the country and there are already signs of this happening.
Indeed, the UK housing market is almost unrecognisable from 12 months ago. Not only have average prices climbed to record highs but there has been growth in sales and prices nationwide.
According to the Royal Institution of Chartered Surveyors (RICS) house prices in the UK will see an increase of 8% over the course of next year while the cost of renting a home should rise by a further 2%.
RICS says that this growth is being driven by an acute imbalance between burgeoning buyer demand and sluggish supply with new instructions to estate agents close to stagnating. The institution points out that although significant challenges remain to achieving a sustainable economic recovery, 2014 may well see the nascent pick up in activity gather pace and this will be reflected in the housing market.
In addition to rising prices, the number of transactions should also see a further increase, moving up from 1.05 million in 2013 to 1.2 million in 2014. But RICS says that although this represents an improvement, to put this in context, total sales in 2006 were well above this at 1.67 million.
With the shortage of homes coming onto the market a key factor behind the price rises, some comfort may be drawn from a likely 20% jump in new starts in England over the next year. That would push the total towards the 155,000 mark compared to 125,000 this year and only around 100,000 in 2012.
The latest monthly round ups show how the growth has spread. In the 12 months to October 2013 UK residential property prices increased by 5.5%, the highest yearly house price increase since September 2010, according to the Office of National Statistics.
This is up from the 3.8% increase in the 12 months to September but it also shows that price growth does vary regionally. There was year on year growth of 5.7% in England, 2% in Wales, 3.3% in Scotland and 4.8% in Northern Ireland.
Annual house price increases in England were driven by rises in London of 12%, in the East of England at 4.8% and the West Midlands a4.7%. Excluding London and the South East, UK house prices increased by 3.1% in the 12 months to October 2013.
But the latest data from property website Zoopla shows that the value of the average British home has risen by £10,329 during 2013, an increase of 4.4% over the year which represented a gain of £28.30 a day..
It pointed out that the effect of Help to Buy and low interest rates can been seen in the figures which show increased demand driving up property values on the lower rungs of the property ladder. In England, for example, semi detached houses have seen the biggest increase in value, up 6.42% or £13,054 during 2013 but the gain in property values has been broadening out across the country as the recovery finally starts to be felt across the regions.
London continues to surge ahead of the rest of the country with average property values rising £46,398 or 10% since this time last year, but Scotland is now hot on the capital's heels, seeing 6.85% increase during 2013.
Overall, property prices have risen in 10 of the 11 regions across Britain over 2013 with only Yorkshire and the Humber experienced a marginal fall of 0.37% in average house prices over the past 12 months. And reinforcing the broadening effects of the recovery, northern cities now appear on the top 10 list of best performing urban areas in 2013.
The latest data from the LSL/Acadata index shows that house prices in England and Wales are up 4.9% or £11,219 from a year ago taking the average price to £238,839, the fastest rate in three years. In November alone prices increased by £1,400, reaching a new record and prices have increased on an annual basis in all regions for the second month in a row, signalling a broad based housing market recovery.
By the end of 2013 the index predicts that sales are set to be 16% higher than they were in 2012, adding to the positive outlook for the residential property market going into 2014. Stuart Law, chief executive of the buy to let specialist Assetz, predicts that property prices are set to grow by 10% in 2014 and while this year the headlines have centred on price growth in London, next year we will see the rest of the country fighting back.
He says that well established locations in city centres and suburbs accounting for around 85% of residential property, where employment is high, will see strong price growth. However, in the 15% of areas where employment is low and economic conditions are poor, prices will continue to be suppressed.
Chesterton Humberts is forecasting that national house prices will rise by up to 8.2% in 2014, ahead of a predicted 8.1% rise in Greater London, but does not think there will be a property bubble in the short term due to various government initiatives which will ensure that affordability remains manageable.
The property expert is predicting that national house prices will average 6% per annum growth over the next five years to total growth of almost 30%, but believes that this growth will be sustained until at least 2016 by mortgage support schemes which prop up the lending market by allowing cheap mortgage credit and enabling more people to buy.
Indeed, in 2013 the London property market has broken all the records, with the latest government figures showing 12% annual house price rises in the capital, equating to a growth of £49,079 and more is predicted for 2014.
London is likely to see further house price growth of 5% next year, according to David Pollock, managing director of leading London estate agent Greene & Co, which is being fuelled by overwhelming levels of demand and intense competition for a relatively limited supply of properties.
He predicts that areas such as Kensal Rise, Kentish Town and Finsbury Park are expected to see pronounced growth of up to 6% next year. Neighbouring the established postcodes of Notting Hill, Hampstead, and Islington respectively, these locations are experiencing a great deal of regeneration and also offer excellent amenities, schools and transport links, ideal for young professionals and growing families.
The housing and mortgage markets in the UK look set to continue to show greater levels of activity in 2014, according to the latest forecasts from the Council of Mortgage Lenders. The CML regards an unbridled housing boom as unlikely and says that given the already stretched nature of household finances, the new regulatory environment and the likely future course of interest rates, housing market activity may well ease back of its own accord.
The CML is forecasting a rise in gross lending from an estimated £170 billion this year to £195 billion next year, and £206 billion in 2015. It anticipates that net advances are likely to rise from £10 billion this year to £15 billion next year and £20 billion in 2015.
The CML also anticipates that the number of mortgages 2.5% or more in arrears is likely to stay stable next year at around 150,000, but rise modestly to 160,000 in 2015. The number of repossessions is expected to fall from around 30,000 this year to 28,000 next year before returning to 30,000 in 2015.
In terms of specific features currently influencing the mortgage market, the CML suggests that the volumes of business written under the new Help to Buy mortgage guarantee scheme may be relatively modest, such that it has a smaller but more positive market impact than many commentators suggest.
Ray Clancy
Editor Property Wire
www.propertywire.com
