The wettest January in parts of England and Wales for at least 100 years has not dampened the enthusiasm of property purchasers, and the upward price trend seen in 2013 has continued in January. The housing market has benefitted from a favourable economic background and greater mortgage availability, including the Government’s Help to Buy scheme.
The market recovery, and improving trading conditions seen in the second half of 2013, has set the stage for a strong market this year. Latest Land Registry data (based on actual selling prices) shows that house prices rose by a further 1.1% in December, taking the increase for the year as a whole to 4.4%. However the regional picture is very polarised with prices in London up by 11.2% in 2013, compared with a decrease of 0.1% in the North East. According to research commissioned by Zoopla, the number of homeowners with properties worth more than £1m increased by nearly 100,000 to just under 400,000 last year. Whilst many of these are in London, other hot spots include parts of Cambridgeshire, Hampshire and Oxfordshire.
The UK economy grew by 0.7% Q4 2013 and 1.9% for the year (Office for National Statistics), the strongest annual growth since 2007. Economists are now predicting that it will be the best performing G7 economy for the next 2 years, with growth of 3% p.a. Unemployment has continued to fall much faster than expected, raising fears that the Bank of England may tighten monetary policy in line with its forward guidance. However Executive Director of Markets, Paul Fisher, has stressed that “even if the 7% unemployment rate threshold were to be reached in the near future, I see no need for a tightening of policy”.
Understanding values in a changing market
House prices increased by 0.7% in January according to Nationwide, (up 8.8% versus January 2013) due to the favourable economic background. Rightmove recorded a rise of 1%, which is the biggest monthly increase since it started keeping records in 2002.
It is clear that an imbalance between demand and supply continues to underpin rising property prices, as can be seen from the chart below. Average stock for sale per estate agency fell to its lowest level since February 2007. Increasing demand for property is attributable to the improved economic background and confidence that there will not be any early increase in interest rates, notwithstanding the decision of the Federal Reserve Bank in the USA to start reducing Quantative Easing.
The Royal Institution of Chartered Surveyors has commented that it is dangerous to see the UK market as a single entity, and is predicting an 8% increase in house prices nationally in 2014, but an 11% increase in London. We are hearing reports of some RICS surveyors disagreeing with agreed transaction prices in London and causing deals to falter. As has always been the case, cash is king when agreeing transactions.
Prime London continues to be favoured by UK and foreign buyers, with selling agents with whom Garrington regularly deals with reporting around 19 registered buyers for every available property. Having recently secured a purchase for a client in London, Garrington noted that the 14 other properties viewed have all subsequently gone to sealed bids. In the £800,000 to £2 million price range best and final offers are fast becoming the norm in London, with many homes being sold within days rather than weeks.
Clearly in such competitive conditions there is a danger of overpaying for a property, and it is important to get the right objective advice as to what to pay – and indeed what not to pay.
Whilst the short term economic and market outlook remains favourable, and we believe that prices will continue to increase, buyers need to factor in the longer term impact of rising interest rates, and the risk of overpaying in areas of highest demand. Garrington remains well placed to offer expert advice in London and across the UK.
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