Welcome to BuyAssociation.co.uk

Can the confidence continue? – Tim Betts, Taylor Wimpey

Can the confidence continue?

Over the past six months successive house price increases have demonstrated confidence returning in the property market, as more people start to buy homes, pushing up demand.

But what can we expect as we move into the spring/summer period, traditionally a very busy time for movers? And if we are among those choosing to buy a new home now, can we look forward to it growing in value?

The answers really depend on the underlying causes of the current rise in property values, so it’s worth examining the reasons for the recovery and why it looks set to continue in the long term.

There are three main factors which drive up property prices: supply and demand, affordability of homes, and confidence in the market.

Housing supply and demand
A key reason for property prices increasing is a shortage of properties versus demand. The UK’s population rose by 400,000 in 2007-8 and predictions by the Office for National Statistics suggest this level of annual growth will continue, adding 10 million more people in the next 25 years.

By comparison, just 118,000 new homes were completed in 2009 according to the Department of Communities and Local Government.

The effect is more people house-hunting among fewer homes. Over time, this demand drives up prices – in short, the home you buy now will be in even bigger demand when you come to sell it in future.

Affordability of homes
The average house price, according to the Land Registry, was £153,000 in spring 2009, down around £30,000 from the £183,000 peak in early 2008. By comparison, that ‘average’ home now costs around £162,000 – still relatively affordable by recent standards.

Of course, most of us don’t have that sort of cash, and so affordability is also relative to what we can borrow. Today’s rule of thumb is that you can borrow three times your income – for example, a £90,000 mortgage if you earn £30,000 a year. However, some key lenders are moving towards greater flexibility, and we are seeing the re-emergence of 90% loan-to-value rates. Used sensibly, more flexible lending makes homes more affordable to us without prices having to fall.

Another factor which makes homes more affordable right now is interest rates that are at an historic low. When prices fell in the last recession, interest rates of up to 15% meant even bargain-priced properties could cost us an arm and a leg in mortgage repayments. Today buyers can enjoy a much lower cost of borrowing, which doesn’t make such a financial dent.

Good-value property prices and access to more money at a low cost puts more people in the running to buy homes – and while there is demand is on the market, property values will continue to increase.

Confidence in the market
For many months now, the Halifax, Nationwide and Land Registry house price figures have revealed a steadfast recovery is going on around us. Yet perhaps in a bid to keep this long-running story sounding fresh, a significant slice of the media has begun to suck its teeth and suggest it won’t last. Fortunately, the home-buying public is proving them wrong.

Thanks to well-publicised Government-backed schemes such as HomeBuy and the First-Time Buyer Initiative, young people are increasingly aware that the chance to invest in bricks and mortar in a rising market includes them. Although many have waited longer to own a first home than in years past, the shared equity schemes and deposit assistance offered by new homes developers such as Taylor Wimpey are helping first-time buyers to bridge the affordability gap and take advantage of lower interest rates and good-value property prices. The result is a new wave of confidence in this important sector of the market.

The same is true of those seeking to move upmarket. There is strong recognition among homeowners that a rising market is a great time to invest in a bigger or better home. Help is at hand for this kind of mover though schemes such as part-exchange, in which they can trade in their old home against the price of a brand new one, and Easymover, in which the house-builder finds them a buyer.

Home-owners are also recognising that new-build homes as a ‘safe bet’ at a time when we’re less keen to speculate and renovate. The security of knowing exactly how much a property will cost each month without the projected costs of restoration and the value it may – or may not – add has made new homes a firm favourite in the current market.

2010: A year of positive growth
It’s clear that confidence in the UK housing market is back now, and the reasons behind this reveal it’s built on firm foundations to continue for the long-term future.

The Centre for Economics and Business Research (CEBR) has just revised its house price predictions for 2010. Instead of an average 2-4% rise in prices, the Centre now says it’s going to be more like 6%. It also predicts house values will be 20% higher by the end of 2013.

And if you’re still wondering why we should believe them, it’s worth remembering – the CEBR was one of the few analysts that correctly predicted recovery would start in 2009.

Tim Betts

Tim Betts is Sales and Marketing Director for Taylor Wimpey West London, which has new homes developments in Berkshire, Buckinghamshire, Hampshire, Middlesex and Surrey. For further information, call Taylor Wimpey West London on 01256 745203 or visit www.taylorwimpey.co.uk

More pages

Page 1: Can the confidence continue?

All you need for a beautiful bathroom - at affordable prices

22.5 per cent annualised returns Dedicated student accommodation property investment with low entry levels and deposit protection

Secure, cash-positive UK property investment Fully tenanted for 2011/2012 and with yields up to 8 per cent

UK Investment property from just £34,500 High-quality student rooms in an emerging market with 10% net yield guaranteed

UK property insurance from intasure - Click here for great deals and up to 40% risk related discount on UK & overseas insurance

Advertise Your English Rental Property simple, effective and affordable marketing online!