A Market Turnaround
This rising performance represents a complete turnaround from the trends of the last few years, in which the property market in most regions outside London and the South-East threatened to go into extinction. Average house prices in the UK fell by 26% in real terms between the latter part of 2007 and the close of 2012. And despite strong nominal price growth throughout 2013, prices remain at nearly a fifth below their pre-cash peak in real terms. The rise in house prices across the United Kingdom has now led many to fear the potential for a housing bubble. However, given that average monthly transaction levels remain at more than a third below the long-term average for England and Wales, these predictions are most likely unwarranted.
The Price Outlook for 2014
The general outlook for 2014 is that the market will most likely experience positive price growth across many regions in the UK. The overall effect of this should be very positive for the economy. Market growth should stimulate the introduction of new money into the general market, as prospective homeowners can confidently invest in both new homes through companies like Harry Rose Homes and their associated costs. Naturally though, there will be some minor variations. Average house price values will continue to rise throughout the next 5 years, though the pace will most likely decrease as the end date for the Help to Buy schemes draws closer in 2015. Though strong domestic and international demand should continue to support price growth throughout England's capital, the dynamics of the London market on the whole have begun to shift. In fact, we may now see growth accelerating at a much faster pace in the boroughs surrounding central London, with prime central London following suit. This of course would represent a reverse of the trends of the past several years.
The Wider UK Market Outlook
The general UK market will remain highly localised, with regions nearer London performing well due to their obvious financial links to the capital. However this by no means dictates that house prices to the North of the UK won't experience growth in the coming years. On the contrary it is likely that prices in the East Midlands may see a rise in value of up to 7.4%, with properties in the North East and North West seeing a predicted price rise of 6.7% and 7.1% respectively. In general, the economy should have strengthened considerably come 2016, with a predicted increase in both employment and real incomes. This should be all means support the transition to a predominantly stimulus-free market, though there may very well be a sustained period of more modest nominal price rises following 2016.
Prime Market Analysis
Prime central London property will start to lose ground in comparison to the mainstream market over the coming years. The prime market has outperformed since 2009, with prices rising by more than 60% in some cases since March of that year. And whilst it is predicted that this price growth will continue through 2014, it is also quite likely to stall come 2015, as a result of uncertainty within the market in the lead up to the UK general election. After the election, price growth throughout prime central London will most likely continue to run ahead of inflation, causing nominal as well as real price growth.
Rental Market Analysis
Rental prices have risen steadily since 2010, though at a considerably slower pace since 2012. And there is definitely room for rental inflation alongside an anticipated rise in overall earnings throughout the next few years. There has been some suggestion that the support offered through Help to Buy may in fact have a decidedly negative effect on the rental market. But whilst taxpayer subsidies for mortgages may effect rental growth in some areas over the coming years, a continued high demand for rental property, particularly around the UK's urban centres, will lead to continued growth overall within the sector. Increased interest rates will definitely put additional upward pressure on rents starting in 2015 and 2016, as affordability levels for homeowners begin to experience a notable decline. In turn, it is fairly likely that rental growth will in fact begin to overtake price growth from the start of 2016.
