March sees UK housing demand outweigh supply

Gap between supply and demand remains extended according to Hometrack

English Terraced HousesFears of a growing housing market bubble have gathered pace this month as demand for homes continues to outstrip supply all across the UK. Although house price rises were recorded at 0.1% less than February 2014, the overall 0.6% rise in market values during March still shows a continued upward trend.

On average, home sellers are achieving 96.2% of the asking price, marking the highest rate seen in over a decade as buyers hunger to buy homes grows stronger. Staggeringly, London property is achieving an incredible 99.3% of the asking price and across every region of the UK, the figure is above 93%. All of this points to further price rises, according to a report recently published by Hometrack with the gap between supply and demand remaining extended, showing no signs of changing in the short term.

Should we be concerned?

Housing developers have stated that whilst more homes are being built, the industry is unlikely to meet government targets in the near future. Industry commentators also state that the sector’s failure to keep up with rising demand could drive prices up to unsustainable levels, triggering the daunting prospect of yet another price crash; leaving new homeowners in negative equity. Westminster is being urged from many quarters to take decisive action to ramp up supply with Government led housing schemes.

At present, the main concern is still London with the capital showing the biggest signs of a property bubble not seen in a generation. Whilst some analysts within the estate agency industry remain calm, others are concerned that any major downward events in London could have a devastating domino effect on the rest of the UK.

Homes and land owners still remain very skeptical and with the markets showing encouraging signs of growth and intense demand, many are still yet to be convinced to sell up and cash in.

Who or what is to blame?

Many have been quick to declare the Government’s Help to Buy scheme as the main culprit however, contrary to this sentiment, Richard Donnell, Director of Research at Hometrack, stated that overall sales supported by Help to Buy are ‘relatively small’ and ‘the real driver of higher house prices is record low mortgage rates and strong demand from first-time buyers and investors who have no property to sell, which is compounding scarcity. With average mortgage rates currently at 3 per cent or lower, compared to over 5 per cent before the downturn, households have seen a significant boost to buying power.’

So it seems apparent that the scale of house price increases in the coming months will depend on whether existing home owners and buyers will bid up the prices of homes, which could then lead to all sorts of inflated values.

However, the good news is, things could soon be about to change and the current mad rush could be down to new legislation about to come into force, which means lenders have to ensure that buyers can not only afford their mortgage repayments now, but also when interest rates eventually start to rise again. A hint of things to come no doubt.

The second half of the year may see a price correction but at present levels of demand, that may still not occur considering cash buyers and investors account for up to two fifths of property sales.

Recent official house price figures released by the Office for National Statistics showed property values rising at 6.8% annually – over five times as fast as the ONS wages measure, which is up by just 1.4%. In the year to January 2014, the average home went up £17,000 to £254,000, while wages rose by just a paltry £417.

Separate figures from the Land Registry recently showed house prices across England and Wales rose by 5.3% in the year to February 2014 but prices in London soared by a whopping 13.8%. With growth figures presently continuing on these levels, many do have reason to be concerned. But one thing is for sure, with demand as it is, it is most certainly a sellers market once again.

Will 2014 be a happy new year for property developers?

New UK home building up according to latest figures

1384332_52678652The latest figures from the National House Building Council state that over 34,000 new homes were registered during the last quarter of 2013; an increase of 30% compared to the 26,000 plus registrations seen in the same period the previous year.

Just this past November 2013, 11,409 homes were registered broken down into 8,000 + in the private sector and 3,000 + in the public sector, returning an increase of 20% on last November’s overall total of 9,533.

2014 set to be a strong year for house price growth in the south east

Average UK house prices increased by 4.4% over the course of 2013 and market growth is set to continue into 2014 with the strongest gains unsurprisingly set to be seen in the south east, according to latest analysis.

With demand from aspiring home buyers increasing and a continued lack of supply of houses on the market, this growth is set to continue well into the year as a whole.

Property website Home.co.uk predicts that London and the Home Counties will continue to outpace the rest of the UK’s housing growth this year. Using key data and trends from their ‘Home Asking Price Index’, analysts compiled a set of regional price forecasts, predicting the potential winners and losers in the twelve months.

They predict that marketing times will drop further as demand increases around the country and supply will continue to decrease, especially in London and the South East.

The North West, Yorkshire, Wales, Scotland and the North East’s price rises will still remain below the national rate of inflation with the ever-popular buy to let sector experiencing continued grow despite falling returns.

However, with the support of George Osborne’s Help to Buy scheme for home purchases below £600,000, house price growth has picked up pace to the point where some commentators have expressed genuine concerns of yet another property bubble being created.

Will the current growth last or will it eventually fall flat?

On the surface of things, it is not at all surprising that house sales are up on 2012 to mid-2013 levels as stamp duty exemption for first time buyers ended which encouraged new entrants onto the housing ladder. Other Government schemes such as Home Buy, Right to Buy and Funding for Lending are starting to have a big impact on the economy which is helping to gradually increase demand and of course, house prices.

With interest rates remaining at historically near zero levels, affordability will remain sound for existing mortgage holders and first-time buyers who can get finance however, some have concerns that when the inevitable rate rises do come along, trouble could be ahead.

What can’t be predicted is when the Bank of England governor Mark Carney finally decides to raise interest rates to help economic stimulus but what can be predicted is it has to happen eventually. With a 2015 generals election just over a year away, it is safe to predict a continuation of low interest rates for the foreseeable future to avoid rocking the boat.

The economy and politics go hand-in-hand so a solid prediction could be that 2014 is the year to take advantage of renewed confidence and get back into the markets whilst the going is good. 2015 will most likely be another positive year however, if rates do have any hint of being hiked, certain higher risk loan holders could suffer. Will that effect land or house prices? That all depends on the scale of the damage.

Market confidence is all about supply and demand!

House-building is starting to recover after the huge drop off in development post 2007. Although there’s plenty of positive signs of growth, the on-going lack of finance for large-scale development and inactivity caused by planning red tape continues to act as a drag on the building of new UK homes.

Whilst the level has begun to rise somewhat, it will still take quite some time for output to increase significantly and experts anticipate the level of completed housing developments will remain subdued over the next two years. In short, there are good opportunities for land development this year but making the right choices based on location, desirability and price are key factors moving forward.

We feel that 2014 is a year of opportunities but ones that must be chosen wisely. Confidence is starting to improve but we are still years away from the heady days of the late 90’s and early 2000’s.

Unwanted Land – What Can I Do With It?

(LDP) LOCAL DEVELOPMENT PLAN

Means it is possible to build on the land

Local councils consider the development envelope every 5 or 10 years,
if you think your land might be suitable for commercial or residential
development you should ask the council to include it in the LDP (local
development plan). Once it is included in the LDP it will be
attractive to builders as they know they can build on the land. They
will then have to convince the planners that their scheme will be acceptable.
The planning process what can I do once I have planning consent

 

How do I gain planning consent on my land?

There are several options

Once your land is in the LDP, you need to decide whether to build on
it yourself or sell it to a developer.  If you wish to build yourself
it is important to ask a planning consultant to help you.  If you
would rather sell to a developer you can use a Land Agent to help,
some of these offer a free service to land owners.

 

The planning process

What to do

If you wish to build yourself, find an established Planning Consultant
who will discuss your site with the local planners at the council and
then draw up and submit drawings for approval.

 

What is an Option Agreement?

My land has no planning consent

If you think your land has development potential a builder or investor
might be interested to get the planning consent, this will be done at
their expense. You will be asked to enter into a contract to sell the
land if suitable consent can be obtained. You will not be able to sell
the land to anyone else during the period of the contract.

 

Once planning consent has been granted how long does it last?

This varies from one council to another

Usually 3 or 5 years but once you have started to build the planning
consent does not lapse