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UK property prices forecast to grow by over 30% in next five years
The Office for Budget Responsibility (OBR) as revised its forecast for house price growth in the UK in the next five years from 27% to 30.8%. According to the OBR, growth of 8.6% is expected in 2014/2015, 7.4% in 2015/2016, 4.3% in 2016/2017, 3.7% in 2017/2018 and 3.7% again in 2018/2019. It says in its latest forecast report that by the end of the forecast period, house prices are expected to be 0.5% below their pre-crisis peak in real terms and the house price to income ratio to be 2.3% below its pre-crisis peak. The OBR also expects transaction volumes will rise at a faster pace than originally forecast over the coming five years. The independent fiscal body estimates that housing transactions in 2014/2015 will be 1.28 million, some 6% higher than it forecast in December. According to Grainne Gilmore, head of UK Residential Research at Knight Frank, this bump up in the forecasts for price growth and activity, especially over the next year, reflects the additional stimulus in the market via Government policies as well as the underpinning of record low interest rates. She also pointed out that several different measures have been announced to help boost housing supply. The Chancellor of the Exchequer George Osborne had already announced a £6 billion four year extension to the Help to Buy Equity loan, which has been welcomed by house builders. ‘The extra longevity of the support to the market will allow house builders to commit to achieving planning on and building out much larger schemes, something that is crucial to deliver the step up in housing supply that is desperately needed,’ she added. Also, Osborne’s announcements on additional funding support for smaller developers through the £500 million Builders Finance Fund is also welcome, as smaller developers are still being hit by an effective funding crunch, finding it hard to secure funding or finding that they are being charged higher premiums for loans. The consultation on Right to Build measures to encourage self build could also help boost the numbers of people developing their own homes if they come to fruition. Self build accounts for just 8% of all new build development in the UK, compared to 40% in the US and an even higher proportion in Europe. Opening up the Equity Loan to mortgage borrowers who are building their own home will also be welcomed. The Federation of Master Builders (FMB) said the announcements are a major boost for housing supply which is so lacking at present. ‘Access to finance is a major stumbling block for viable small house builders so this government intervention is much needed as many major banks are still reluctant to lend for small residential developments. This additional support will provide the necessary finance to small house builders and help increase the overall supply of new housing,’ said Brian Berry, chief executive of the FMB. Michael Holmes, spokesperson for The Homebuilding, Renovating and Home Improvement Shows and editor in chief of Homebuilding and Renovating magazine, said… Continue reading
US home prices expected to rise 3% in next 12 months, says latest forecast report
US property prices are expected to rise 3% in the next 12 months but growth will depend on location, according to the latest real estate market report from Zillow. The Zillow Home Value Index rose to $169,200 in February, up 5.6% year on year and the number of homes listed for sale on Zillow was up 5.5% annually. However, the firm says that as the spring home buying season heats up, buyers and sellers nationwide can expect very different experiences when it comes to negotiating power. According to the latest Zillow analysis of national buyers' and sellers' markets, sellers in the West will likely have the upper hand in negotiations when selling their home, while buyers in Midwestern and East Coast metros will likely face less competition and have more room for bargaining on prices. The Bay Area, San Antonio and Los Angeles are the top prospects for sellers and Cleveland, Philadelphia and Tampa the top of the list for buyers, according to Zillow. In this analysis, a sellers' market is not necessarily one where home values are rising, but rather one in which homes are on the market for a shorter time, price cuts occur less frequently and homes are sold at prices very close to, or greater than, their last listing price. In buyers' markets, homes for sale stay on the market longer, price cuts occur more frequently and homes are sold for less relative to their listing price. The real estate data in markets on both coasts are telling markedly different stories, the report says. ‘Relatively strong job markets in the West are helping spur robust demand, which is being met with limited supply, causing rapid home value appreciation and giving sellers an edge. In the East, housing markets are appreciating a bit more slowly, and homes are staying on the market longer, which helps give buyers the upper hand,’ said Zillow chief economist Stan Humphries. ‘In general, buyers in sellers' markets this spring can expect tight inventory, increased competition and a greater sense of urgency. Sellers in buyers' markets may need to be prepared to lower their asking price, or to wait longer for the perfect buyer to come along,’ he explained. ‘As we put the housing recession further in the rear view mirror, the broad based dynamics that applied during those days, when all markets were reacting similarly to nationwide economic conditions, are fading. Real estate has always been local, and as the spring market gains momentum, this old adage will only become more pronounced,’ he added. He also pointed out that but both monthly and annual US home value appreciation slowed to their lowest paces in months. National home values were almost flat in February from January, and were up 5.6% from February 2013. The pace of home value growth has slowed in recent months as more inventory of for sale homes has helped meet demand. Nationwide, while inventory remains tight, the number of homes listed for sale on Zillow was up 5.5% annually… Continue reading
Independence debate having no effect on improving Scottish property market
Scottish house prices have so far shown no negative response to the independence debate with prices up 1.1% in January, the largest monthly increase for over four years. Average prices are also up 3.9% year on year, the largest annual increase since September 2010, according to data from the latest LSL/Acadata Scotland House Price Index. It takes the average house price to £160,270. ‘The enthusiasm of property investors suggests the independence debate is having no impact on confidence within the Scottish housing market. Scottish prices were up £1,680 in January,’ said Donald MacLellan, chairman of Walker Fraser Steele Chartered Surveyors, part of LSL Property Services. He pointed out that five consecutive months of rising prices indicate the market has bounced back fast as it gathers the fruits of the wider economic recovery. ‘Whether the possibility of Scottish independence throws up all sorts of question marks such as the economic cost of a separate monetary system for Scotland, currency risks, changes to stamp duty and land tax, the property market seems currently unaffected,’ he explained. ‘And whether some businesses are alarmed by the prospect of the use of a currency other than sterling, a development that might lead to a rise in transitional risks, large business costs, with corresponding implications for jobs, as of yet there is little obvious impact,’ he said. ‘Banks such as RBS and Standard Life have threatened to leave Scotland altogether and decamp to England, possibly causing a drop in net lending. But if a yes vote for independence looked like the more probable outcome, we would expect this uncertainty to have manifested itself in property prices. As we can see, there has been no such impact on the housing market,’ he added. The LDL data also shows that 2014 recorded the highest volume of sales in a January since 2008. ‘Increased lending and mortgage availability are reaching heights not seen since before the recession as first time buyers return to the market en masse. Mortgage finance, for those who can access it, is at its cheapest for some time,’ said MacLellan. ‘This is sustaining activity in all sections of the market, specifically buy to let investors and homeowners looking to upgrade. The spring market in Scotland will see more lending to first time buyers thanks to cheaper rates, a boost in high loan to value mortgages and the support of Help to Buy,’ he added. He also pointed out that the lack of supply in properties in Scotland is boosting competition between new and previous buyers, propping up prices, adding that the property market doesn’t appear to think things are set to change any time soon. Interest in Scottish rural estates remains relatively healthy despite the independence referendum and the possibility of new land reform legislation, it is claimed. When it comes to the more specialist sector of the property market, real estate experts believe their could be an impact in the run up to the vote in September but it is likely to be short lived. For… Continue reading
