Property News : WHAT TO EXPECT IN 2014
Examining the year-end position reveals that investors have cause for celebration, if they’d bought prime central London property in 2013. According to the Nationwide, “UK house prices increased by 1.4% in December and were 8.4% higher than December 2012. “All UK regions saw annual price rises in 2013”. However, “house price growth continued to accelerate in London, reaching 14.9%, the highest growth rate since Q1 2010. Prices in London are now 14% above their 2007 peak.”
This means that the rise in prices in London is twice the UK average growth rate. Similar figures are also recorded by the Halifax (see graph) and the Office for National Statistics. The ONS believes that rises are “again largely driven by London”, where the rise in prices is “more than double the UK average increase”.
Is property still a good investment?
The Nationwide has calculated that “house price growth has been outstripping average earnings growth since the middle of the year.” With the average Londoner earning about £37,000, this means that homeowners are making more money out their properties than their jobs. Prime central London property has also been outperforming other types of investments. Andrew Batt, International Group Editor of Property Guru Group said that stock levels in the sub-£2 million bracket have been down 37% year-on-year and that prime central London property has also outperformed gold, which fell by a quarter from January to mid-December.
Reason for rise in house prices
The surge of London property prices is driven by a number of factors such as –
- Shortage of new homes.
- increased confidence about the economic recovery.
- huge demand for London properties by overseas buyer.
- low interest rates.
- poor investment returns in the Western hemisphere.
- London’s investment status as ‘safe haven’.
Recent data from the Royal Institute of Surveyors has shown that UK property sales in December 2013 were highest since March 2008. This and the increase of property prices has caused speculation about a property bubble. Mark Carney, the Governor Of The Bank of England, has robustly rejected this, saying that “We’ve had acceleration from quite a low level. Any time we see a sharp increase in credit growth we take an interest.” Peter Bolton King, the RICS global residential director said that an increase in affordable mortgages has released suppressed demand from aspiring buyers who have tried to get a foot on the housing ladder in recent years.
So what does the future hold?
Halifax is expecting “house prices to continue to rise this year, most likely at a broadly similar pace to 2013.” The RICS annual housing market forecasts that “2014 may well see the nascent pick-up in activity gather pace and this will be reflected in the housing market. Across the UK, all parts of the country should see prices rise next year. Predictably, the biggest increases are to be seen in London, where the cost of a home will jump by around 11%.” Mark Carney told lawmakers on Parliament’s treasury committee that he predicts that house prices will keep rising this year and next, but gains in 2015 are likely to be at a slower pace.” The Daily Telegraph put Kensington & Chelsea in second place among its top 20 places to invest property in London. It expects that property prices in Kensington & Chelsea to increase by 25% over the next five years.