Over the course of the past few months, a number of factors have conspired to drive something of a boom in the property market. This is especially true in the capital, as there is a reasonably limited supply of available property in the London market which has driven prices up.
Here alone, we have seen an estimated 50% of sales going to final sealed bids and prices have climbed by at least 10% in the first two quarters of the year. So is this countrywide, or is it just a spike in the London market that will lead to poorer sales later in the year?
According to the Independent, mortgage lending in May was up by 21%, the highest rise in the past five years. However, the report also shows that those with mortgages in the north of England continue to struggle, with as many as 1 in 7 people stuck in the negative equity trap.
Just a mini-boom?
Whilst this could suggest that the positive outlook in London and surrounding areas is not reflected nationwide, that’s not really the case, as many conditions have helped to drive the current climate.
Lower interest rates, coupled with the government Help to Buy scheme and a willingness for lenders to fund homebuyers, alongside an upsurge in those who were renting now hitting the market seems to make the outlook positive all round.
As well as being the strongest start to the year since 2004, according to the Telegraph, prices have risen by 9.1% on average all over the country. Whilst London has seen the biggest rise, with an asking price twice the national average, prices have risen month-on-month across every region in England and Wales.
Despite the north suffering a high incidence of negative equity, it looks like this could be on the move as the region saw the strongest monthly growth, with a 4.2% rise.
This, alongside other industry studies, point to renewed confidence from sellers and signals that buyers are finding it easier to get a mortgage. Lenders have also slashed interest rates since the introduction of the Help to Buy scheme was introduced.
According to Miles Shipside, director of RightMove, the recently seen record numbers in sales and prices are being driven by "a definite southern bias", although there is an overall “strengthening of demand”.
Property across the pond
In the US last year a similar recovery was seen as we have seen in the past few months, leading some to speculate that at some point the “bubble will burst”.
A report from Forbes says that the current high growth in house prices in the US is not sustainable due to a number of factors, including:
The inevitable time when housing stock becomes too low and stagnates the market
Rising interest costs, coupled with rising prices
However, whilst parallels can be found between the UK and US markets, it’s also wise to take into account the drivers behind the increase in activity in this country.
Since April, the governments Equity Loan scheme has seen 4000 new build homes being reserved and is thought to be helping more than 25,000 people a year get onto the housing ladder. Add to this forecasts that the Mortgage Guarantee scheme will launch in January 2014 and is expected to fund around 300,000 new mortgages per year, and it doesn’t look like the bubble will burst anytime soon.
At least not until 2017, when the schemes are due to come to an end in any case. Add to this an overall improvement in confidence about the economy as a whole, alongside rising employment figures and huge demand for housing, especially in London, and things look robust for the foreseeable future.
Article by Brett MacDougall, Director of Hunters Camberwell branch. Circle Brett on Google+ HERE.