House prices are likely to rise by 17 per cent over the next five years, according to research from CBRE. Pent up housing demand in core markets, combined with the UK's economic recovery, improved lending conditions and a shortage of supply will send values upwards. Government schemes to boost the housing market are particularly paying off and proving to be huge drivers of property market growth.
In particular, the CBRE points to the Funding for Lending scheme for facilitating lower mortgage rates. What's more, the Help to Buy equity loan scheme, which has seen 15,000 reservations since April, is cultivating greater market activity. Bringing the second phase of Help to Buy forward has also increased interest in residential properties, particularly in London. The CBRE claims this could be a "real game changer," bringing in the region of half a million buyers to the market.
Yet despite strong house price growth over the next five years, it won't all be smooth sailing. The CBRE explained that interest rates are likely to increase during this period, putting pressure on affordability and capping growth once again.
In London, overseas buyers will continue to play an important role, which will cause land across the region to offer 'easy trade'. The domestic market is improving too, thanks to improved lending and accessibility for all pricing levels. However, "an emergence of house-builders and registered providers entering the market has made it all the more competitive, leading to an upward pressure on regional land values".
The south-east will also continue to experience robust conditions. While previously unviable land is re-entering the market and the National Asset Management Agency is releasing additional opportunities, considerable competition for target locations is pushing land values skywards, which has a knock-on effect for general market prices.
Unfortunately, things appear unlikely to look up too much in the north. "The housing building sector in the north of England remains fundamentally PLC driven as those regional players remain reluctant to re-enter the market due to ongoing funding restrictions," the CBRE explained. "While government assistance is providing developers with sufficient sales confidence to activate land buying across the sectors, the primary focus for the region remains on first and second time buyer markets."
Why are house prices so high? Take a look at the house price paradox.
- Tuesday 05 November 2013