Price growth may have slowed, but overall, most Britons believe that home values will continue to rise. Government stimulus for home purchases has helped.
Do the sometimes stagnant house price levels in London tell a prospective English home buyer anything? Or for that matter.
It’s probably not month to month. Shares of publicly traded domestic homebuilders fell in early 2015 on news that prices had declined in December and January. But that says more about the sometimes shortsighted nature of markets. In fact, year-on-year prices in London increased at the end of 2014, and 2015 also shows evidence of rising prices. Stories of a bursting bubble are, for now, an exaggeration that land investors and home builders shouldn’t use to build a business plan.
Home prices need to be considered more broadly across the UK, as London is an extreme case. Foreign buyers buying sky-high luxury properties in the capital city have little house builders London influence on price levels in Manchester, Leeds, Edinburgh and Southampton. In Knight Frank’s February 2015 Markit House Price Sentiment Index, a measure of homeowner confidence in property values, all regions of England and Wales reported increases in price values for that month (Scotland is an outlier by showing a slight drop). And when it comes to expectations for next year, all regions showed even greater optimism about what 2015 holds for them.
“The relaxation in house price sentiment indicates that the market is in a more stable year than 2013 or 2014,” according to UK head of residential research at Knight Frank. “While buying intentions are relatively high, there is less conviction that prices will rise sharply this year. Only 43% of households expect their home value to increase over the next 12 months, compared to 55% in February last year. ”
UK Joint Venture Associations (JVPs) that are in the residential development business have yet to choose which markets to build for: first-time buyers or those moving up the property ladder. What is clear is that the government’s plans to boost homeownership for the first time have achieved that goal. And in response, home construction has increased.
The Help to Buy program, introduced in late 2013, allows first-time buyers to venture up the ladder with a number of benefits. Some facts about the scheme:
• Government guarantee to banks on mortgages up to 95 percent LTV (loan to value). This is an obvious benefit for working families who currently rent and already have children and for whom it is difficult to save for a deposit.
• Help to Buy users earn 19% less than the average home buyer (that is, you are helping low-income households become homeowners nonetheless).
• Median home price from Help to Buy purchases was about 11% lower than the market average of £ 230,370 (ie lower cost homes are moving well because of the scheme, ie not it’s a plan played by those who don’t). needed).
• Of the 118,830 new houses built in 2014 in England, almost 25 per cent (28,666) were built under the scheme. While precise statistics are not available on how many JVPs were involved in those buildings, the Office for National Statistics (“Production in the construction sector”) reports that in 2013 private sector home builders spent 11 times more on construction than social housing builders. . Of course, it helps that mortgages are now available in all sectors at rates below 4 percent (rates can be as low as 1.99 percent for borrowers with deposits of 10 percent or more).
Still, it’s worth mentioning that overall housing affordability remains an issue. According to Shelter, the housing charity, median home prices are now 10 times the median salary for first-time buyers. In 2000, that figure was five times higher than the median salary. While it is driven by the profit motive, it effectively reduces upward pressure on prices by increasing the overall housing supply.