We are not the first to proclaim that 2013 saw a significant turnaround in the housing market both in terms of house price increases as well as a renewed appetite from banks to lend to buyers.
Several factors contributed to this change; we would summarise it as follows:
Firstly, a soaring demand for London property, particularly from foreign buyers, where prices shot up by some 9.4% in the year to September. According to latest figures, the average property in the capital is now &434,000.
Secondly, measures by the Government to encourage lenders, boost mortgage volumes and help buyers with small deposits get onto the property ladder. The Funding for Lending Scheme provided banks with cheap state backed funding on approximately &80bn of loans and allowed lenders to pass the gains onto mortgage customers in the form of cheaper rates. It proved to have significant effect with the average two year fixed rate falling from around 3.75% in June last year to around 2.5% in September. The Help to Buy scheme was launched in two stages, designed to allow would be buyers with as little as a 5% deposits to buy either new or second hand homes of up to &600,000.
The scheme allows first time buyers to return to the market and this combined with record low interest rates and a shortage of properties on the market has caused a market rebound. We await figures on the take up rate and true effectiveness of Help to Buy phase two when it gets fully operational this month.
Finally, the feel good factor. Martin Robinson, Director at Hunters says, "This is simple. People are starting to feel more confident about the housing market. If you can secure the money to buy what you aspire to and you are confident that the price of that purchase is going to rise, not reduce, then you feel good about making the purchase".
Predictions for the housing market from a variety of sources including the Treasury, the Royal Institute of Chartered Surveyors, the National Housing Federation and estate agents are unanimously declaring that house prices will rise during 2014 and over the coming years – albeit at different rates and speeds, from a modest 5.2% in 2014 (The Treasury) to a soaring 35% rise over the next seven years (National Housing Federation).
Hunters Managing Director, Kevin Hollinrake offered his views on the market that was in 2013 and the market to come in 2014, "2013 was a much better year for the housing market with sales transactions nationally up by around 15% and the lettings market continues to perform well despite the pickup in the sales market. In our view the market will continue to improve in 2014. The unexpected improvement in the market has led some commentators to speculate that we are on the verge of another housing bubble but that it not our view. Prices across the UK are lower than their 2007 equivalent in 86% of locations across the UK (source Hometrack) and Real UK House Prices are below trend (source Nationwide)."
You can follow Kevin's market comments on Twitter @kevinhollinrake or visit the News Hub on our website.
Source: The Telegraph