Joining up the property market
7 JANUARY 2014
A new year, a new start. Now that all the dust has settled over the Chancellor’s Autumn Statement and the Bank of England’s 2013 initiatives, we consider what effect these measures may have on a housing market that is predicted to be on the rise.
Forecasts by the Office for Budget Responsibility anticipate that house prices will increase by almost a fifth in the next four years. A similar picture is painted by Savills, our parent company. Its research suggests that over the next five years to 2018 properties in prime Central London and prime regional London will rise by 22.7%, the Midlands, the North and Scotland will increase by 18.1% and the rest of England will go up by more than 20%.
Whilst this is good news for some, for others the dream of buying their own property or upgrading what they have will remain just that. The “Help to Buy” scheme will still be available with banks and building societies having access to a taxpayer-backed guarantee on 95% mortgages. However, the Bank of England’s removal of “Funding for Lending” for mortgages, designed to put the brakes on a property market that is in an upward spiral, inevitably signals the potential end of the run on record low mortgage rates that we have seen in recent years.
Not surprisingly Savills predicts that we are slowly moving away from being a nation of home-owners to one of renters. With the number of home owners set to decrease marginally – currently there are 17.74million with a small decrease to 17.4million anticipated for 2018 – the private rental market is expected to rise from the current figure of 4.8million to 5.83million in five years time.
In many ways, there is a contradiction being played out in the UK housing market. London, which is the one part of the UK that has seen a rapid rise in property prices over the last few years, is its own distinct market place with housing inflation being driven by a lack of supply. Criticism of the Government’s “Help to Buy” scheme suggests that the initiative flares up demand but does not address this shortage of housing. In London, a market that is dictated more by equity than debt, this is further exacerbated by the fact that new developments tend to be at the higher end of the property ladder. Whilst there are no obvious signs that the South West of London market is slowing, the price gap between London and the Home Counties has never been greater. Is 2014 the year that we see the restart of the natural move down the A3?
We have been asking for years how long property prices can rise particularly when they are doing so above the rate of inflation and wage increases. If the predictions for the next five years come true it would appear that, certainly in the short term, the pattern can continue. It may be that for some the notion that an Englishman’s home is his castle may just become a thing of the past as we adjust our national psyche to realising that renting may be the way forward for many. For others, already on the property ladder or who are able to step on to it, their investment will hopefully be a sound one.