Property market commentators must feel more scrutinised than ever before. Twinned with the uncertainty that has surrounded the market over previous years there are now added risks from the Eurozone to contend with. The bond repayment problems in Ireland, Portugal and more recently (and worryingly) Spain are not likely to disappear quickly and are something that economists will keep a close eye on. Although it must be noted that Britain has remained resilient to the worst of these problems to date, and therefore the Office for Budget Responsibility has been forced to raise anticipated performance of GDP.
Adam Challis, Head of Research in a leading letting agency, has forecast sales prices will remain consistent in the South of England. London fares slightly better in their predictions with a small increase of three percent. These estimations are based on the economic factors and the low level of lending. The Council of Mortgage Lenders reported that gross October lending remained unchanged from September at £12.4 billion. In comparison to the same period in the last year, it is nine percent down and only at 40 percent of peak levels.
This data and the previous predictions that the UK sales market will enter its usual lethargic state at the end of the year mean that the early months of last year are unlikely to show any real improvement. The figures from the Land Registry show a 28% decline in English transactions from the same period 5 years ago. Although a decline of any type is not usually good news, this does show an improvement as in Q1 it was at -61%.
At the other end of the research spectrum, the rental market is booming. Well, it’s booming for landlords who continue to receive high rents. As the sales market has slowed, many prospective home owners are choosing to rent and/or may not be able to get the right mortgage product for them. There has also been a massive lack of supply in all areas of the rental market, whether that is for four bedroom houses in Hove or studios in central London. These demand levels have pushed up rents and more recently has meant there has been renewed interest in buy to let options. However, if rents break through affordability boundaries then levels are likely to slow during the first two quarters of the year but will continue to be a key variable in the housing market during the course of the year.
Looking forward to the the following years, no one has a crystal ball but the evidence suggests that there are plenty of factors to keep an eye on. The lending volumes, pricing index and rental increases give us slight inclinations of which way the property market will go in the New Year.