By William Amis
Property investors could be in for good news over the coming months as projections for 2014 indicate that house prices are set to rise – giving them the potential of greater returns. Although the housing market came to an abrupt halt in 2008, with house prices slumping and performances rating at average for some time afterwards, the end of 2013 saw a reversal of this with the market springing back to life.
There were more than one million housing transactions in one year for the first time since 2007, according to the Halifax House Price Index, and sales rose for the ninth month in a row in December 2013 to be 30% higher than one year earlier.
These figures are great news and suggest that the British property market is getting back on its feet. So, if you’re planning on buying or investing in 2014, should you expect to see house prices continuing to rise?
Rising prices
Yes, this year has started where 2013 ended; with prices on the increase and more people buying and selling. The return of the first-time buyer means that January was another good month.
According to Nationwide Building Society’s monthly House Price Index, prices were up 0.7% in the month and 8.8% in the year to date. That means the average price of a home in the UK is now around £176,500.
This is all good news for the economy and investors, but why are house prices going to continue rising?
Help to Buy
In October 2013, the UK government launched its Help to Buy scheme which helps first time buyers get onto the property ladder. Banks and building societies have finally been able to start lending as a taxpayer-backed guarantee on mortgages came into effect.
There is a further rollout of Help to Buy this year, with Santander and Barclays also joining onto the 95% mortgage bandwagon.
Buyer confidence
Another factor contributing to the sudden surge in house prices is confidence. As prices increased throughout 2013, it restored some confidence in the market, with more people choosing to buy and sell. The buoyant economy means people are finally starting to feel like they have more money in their pockets and can get their finances back on track.
Low interest rates
The Bank of England base rate is currently at 0.5% and has been for a long time, but there is speculation that it could rise in the near future. The Bank has been quite clear by saying it won’t be making any rash decisions, but the threat of higher interest rates could mean that people are buying now in order to grab the last of the fixed rate mortgages.
Lack of properties
There is a minor problem facing the UK housing market and that’s a lack of properties. The demand for housing means that there aren’t enough houses being built. This has been a hot topic on the political agenda and the media coverage means that it could be driving house prices up even further.
If you had plans to buy a property this year – whether you’re a first-time buyer wanting to climb the ladder or an investor looking to boost your investment portfolio, it might be worth starting the hunt now before prices soar even further.
* William Amis is a Swedish property investor with a portfolio of over 100 properties in the UK. He uses his knowledge to help advice vita student accommodation.
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