Thursday, 23 September 2021

Prices are likely to surge even more than first predicted

NEW confidence in the UK housing market could see prices surge ahead even further before the end of the year.

NEW confidence in the UK housing market could see prices surge ahead even further before the end of the year.

Strutt & Parker’s latest property market report has therefore upwardly revised its forecast for house price growth in 2013 to 4.5 per cent.

One of the reasons for this was the fact that prime London residential property prices in the third quarter built on growth in the previous quarter.

Transaction levels in this market are also at their highest since 2006, as a growing number of people look to bag a good deal.

In the latest report, Strutt & Parker argues that the optimism surrounding the recent release of UK activity indicators, alongside a continuation of stable credit conditions, is having a marked effect on the housing market.

The decision by the Government to launch the next phase of the Help to Buy scheme three months earlier than planned has also had a positive effect.

There does, however, appear to be a disconnect between the very top end of £10m and above and the remainder of the market, with the former being slowed by both tax changes and perhaps the head of steam coming off the extraordinary levels of activity seen in 2010 and 2011.

Prime London, and especially the prime central London sector, for example, continue to be very different from the rest of the country.

Prices in the rest of the UK are mainly driven by economic performance and the cost and availability of mortgages, while those in the prime London market are impacted by the performance of the global economy, the stance of politicians around the world on global residential investment and the sterling exchange rate.

Some 44 per cent of buyers in the prime London sector between October 2012 and September 2013 were foreign, with the majority being typically investors looking for a “safe-haven asset”.

The report states that UK assets are likely to remain attractive to foreign investors as downward pressure on the currency persists, although this attractiveness is predicated on buyers believing the currency has bottomed out and/or will be returning to long term norms by the time they wish to sell.

Another factor that is likely to play a part is the pace of recovery in the UK, particularly in the key financial services industry in London.

Stephanie McMahon, head of research at Strutt & Parker, said: “2013 has seen the markets pick up across much of the UK and in London specifically latent demand from 2012 has surged through over the summer period.

“The residential market is so sensitive to uncertainty and political change that our bearish medium term view has significant potential upside, both in London and across the UK, should confidence be maintained.”

Separate research from PricewaterhouseCoopers suggests that UK property prices could rise by more than 20 per cent in the next seven years, with the price of an average home rising from £225,000 to £300,000.

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