14 Nov UK house price growth set to resume in 2013, it is predicted
The UK housing market is expected to make steady progress throughout 2013 with accelerated growth from 2014 onwards, according to a forecast published yesterday (Tuesday 13 November). Following a period of restrained growth in 2012, UK housing transactions will hit a million for the first time since 2007 with mortgage lending levels rising to 650,000 new loans, says the report from Jones Lang LaSalle.
It also says that new development will continue to be constrained, with approximately 115,000 completions being delivered in 2013, which meets only half of England’s housing requirement.
UK house prices will rise by just 1% on average in the UK in 2013, with London and the South outperforming where growth levels are expected to increase by as much as 8% by 2017. The rest of the UK will experience slower growth, increasing on average by around 5% per annum by 2017.
The firm predicts rental growth to increase by 3% for the UK on average with London outperforming again, growing by as much as 6% per annum by 2014. ‘We expect institutional investment activity in the private rented sector to gain traction as rental demand increases while mortgage finance continues to be constrained,’ the report says.
Looking ahead to 2014 to 2017 the firm believes that the economic recovery will be muted, but will increasingly fuel housing demand and trigger the release of some pent up demand. ‘That said, funding constraints will still mean growth in activity is hindered and even as transactions push towards 1.18 million per annum by 2017, this will still be 30% below the 2007 peak,’ it explains.
Funding, affordability and demand issues will constrain housing development with less than 150,000 homes being built in England each year, even by 2017, well below the number required.
Average UK house price growth of 4 to 6% pa will be restricted by demand constraints but the fuelling of higher price rises, especially in London and the South is probable given growing undersupply problems.
The improved economy, income security and household confidence will take time to translate into higher household spending and house buying activity but the green shoots of housing market improvement should begin pushing through.
Although the Funding for Lending scheme will cease in 2014, initiatives such as NewBuy will still be live and banks should begin to ratchet up their mortgage lending activities albeit heavily controlled. Development activity should start to gear up as developers and house builders become more optimistic but the scarcity of development finance will continue to stifle and undermine a speedy construction recovery.
London will continue to lead the UK economic and housing market revival into 2014 and beyond, with prices set to rise by circa 4.5% in Greater London, the South growing by 3% and the Midlands and Northern regions by 0.5%. Rental demand will still be robust and stronger than in 2013, with growth averaging 3% per annum in the UK.
‘We expect the UK housing market to be in first gear during 2013, but should be ready to change into second gear in 2014. The market is faced with many challenges but we believe that a gradual shift through the gears towards a better, albeit lowish growth environment, will ultimately transpire,’ said Neil Chegwidden, residential research director at Jones Lang LaSalle.
‘Encouraging economic growth, raising home buyer confidence, supporting funding markets, kick-starting house building activity and mobilising institutions to invest in the private rented sector are the must-do initiatives for 2013,’ he added.
The report also says that the new Central London development market has been vibrant over the past three years despite the on going economic turmoil. Demand has been strong, particularly from overseas and prices in core locations have risen by 24% on average since their low and are now just 2% below their 2008 peak. In Outer core areas prices are 19% higher but still 9% off their all time high, and in some key primes locations prices are now well above their 2007 peaks.
For 2013 it expects UK and international demand to continue along similar levels seen this year demonstrating a healthy level of interest. ‘Central London suffers from a fundamental lack of stock which has helped fuel the price rises over the past 15 years, but we believe that 2013 will witness a number of schemes coming to the market and forecast a 2% price growth for 2013,’ the report says.
‘Our post 2013 prognosis is more encouraging as we believe demand will grow faster and stronger in line with the economic recovery and expect price growth to rise towards 8% per annum by 2016,’ it adds.