04 July 2014
It is becoming harder and harder to not find articles in the newspapers or on line underlining the boom in house process across the UK. There is no question that prices have increased but look into the details and the picture is mixed across the country with some areas increasing by a much higher level than others. What is more, the details of the house price increase will vary depending on which data or report you are reading therefore a middle ground view is perhaps the safest position to adopt. The general view is that UK house prices have increased by 1% in June and where 11.8% higher than June 2013 which clearly now means that the UK has surpassed the 2007 peak that took place prior to the economic downturn. Nationwide Building Society confirmed that all regions and areas of the UK noted price gains but the south of England and London have continued to perform at a different level to all other areas. Their Data has confirmed that:- The average price for a home in the UK is £188,903 Prices have increase for 14 months in a row London prices have increased by 26% in the second quarter , compared to the same quarter in 2013 The average price in London overall has reached £400,000 for the first time The south east of England saw the biggest increase after London with 4.1% making an average home £230,409 with the south West the next highest with an increase of 2.6% to £207,420 followed by East Anglia with growth of 2.5% taking the average to £188,960. Moving up the country, the north saw an increase of 2.3% with an average of £125,125, the West Midlands 1.9% to an average of £160,383, Wales 1.8% to £145,812, the East Midlands 1.7% to £154,145, the North West 1.3% to £144,851 and Yorkshire and Humberside 0.8% to £142,661. Using the Nationwide data, the annual basis price increase for the past year are:- London - 25.8% South East – 14% South West – 9.8% East Anglia – 9.5% Wales – 9.3% Northern Ireland – 8.4% East Midlands – 8.3% West Midlands - £8.2% North – 8.1% North West - 7.1% Yorkshire & Humberside – 7% Scotland – 5.4% However, there is also a general view that prices cannot increase at this level for much longer and that a cooling of the property market must start taking place. In fact, there are early signs that this is taking place already within London and therefore it may be a reasonable outlook to take that the peak in the increase has now already taken place. Certain, the proposed increase in interest rates will help to cool the market still further. Whilst there is no question that the housing market has increased considerably across the UK, has the same outcome taken place in the rental market. The answer is far more mixed depending on where in the UK the focus is being aimed. What is certain though is that landlord are having to look much more carefully at their properties and their financial value as landlords buying properties from the market at present are going to obtain a much lower rental yield than properties that would have been purchased for rental many years ago. This is still at an early stage with majority of landlords having been in the rental market for a long period, but it is not possible for house prices to increase at such a level and the rental market not being affected. Across the UK, rent has risen by 8.4% in England since May 2005 and by 11% in London, but focusing on a more recent timeline of the past 12 months, rent has increased by 1.3% in England, 1.5% in Wales and 1% in Scotland. However, when focusing on London and the South East, as usual a different picture is emerging. Rent in the prime locations of London is currently increasing by between 1%-2% per month since the early spring with the South East increasing by around 1% per month. This is unlikely to be a long term trend, but an increase of 6-10% in rents from the beginning of the year to the autumn is a likely outcome. The fact that this is a regional event makes it more difficult to accurately advise clients as to what the rental market is doing over a larger area, but there is no doubting that the demand for 1 and 2 bed rental accommodation in the prime locations has increased dramatically with an estimated 7 applicants after each rental property is fuelling this rent increase for the short term at least. Our London Rental Price Matrix is tracking these changes and a copy can be made available to help highlight the average rental price for all the core locations and housing sizes to ensure that rental budgets reflect the activity on the ground.