Market Update – July 2014

Is the steam coming out of the property market?

Recent reports would seem to indicate a slowing down in the rate of property price increases and the changes lenders have made following the mortgage market review (MMR) have certainly added delays to the process of securing a loan as lenders go through a more detailed process to ascertain that any loans made are affordable by the borrowers.

There is often talk of the “ripple effect” that has, at its centre, Central London and whatever happens there tends to work its way into the wider UK market. Speaking with agents operating in Central London there is no doubt that there has been a “cooling down” of activity and the manic scenarios being seen only a few weeks ago with several buyers for every property have certainly reduced.

The Bank of England have also signalled that interest rates may need to increase a little sooner than previously forecast but have said that any rises will be small and incremental.

We are also less than a year away from a General Election and, in my experience, as we get closer to voting time there is likely to be a natural slowing down as the uncertainty of result causes people to “sit on their hands” and await the outcome.

At the time of writing however, the sales market remains strong as demand, in most price ranges, still exceeds supply. Yes we are seeing some slowing down of price rises but this is probably a good thing and property in prime locations is still attracting interest from large numbers of potential buyers.

The lettings market is steady and has gone through a period of adjustment as many “accidental landlords” have taken the opportunity of an improved sales market to sell and realise their property value. Rising prices also means that yields effectively reduce although yields remain good in comparison to other investments, particularly when you factor capital value increases over the medium and longer term.

A lack of fresh supply is ensuring good rental returns are being maintained and many landlords are looking to grow their portfolios, a clear indicator that confidence in the sector remains high.

Whilst new home numbers are increasing they are still pitifully below the levels needed to meet demand and this imbalance will help ensure that property values hold up and grow, albeit at more comfortable rates of growth in the weeks and months ahead.

Help to Buy has clearly assisted many, particularly first time buyers, to buy and has also contributed to improving confidence in the sector.

To conclude, my view is that the property market remains set fair for a good and positive 2014. I believe there may be some stuttering during 2015 due to the General Election but that the overall prognosis remains positive.

Peter Lawrence