Property on the up

With data from the Office for National Statistics showing a continuing increase in the average price of a UK home, it’s clear that the recovery in the residential property market is taking hold. Louise Whitson reports.

With data from the Office for National Statistics showing a continuing increase in the average price of a UK home, it&#x;s clear that the recovery in the residential property market is taking hold. Louise Whitson reports. A recent Office for National Statistics (ONS) report showed that, during December 2013, house prices rose by 5.7 per cent in England, 0.5 per cent in Scotland, and 4.8 per cent in both Wales and Northern Ireland, bringing the average UK house price to &#x;250,000. Growth is starting to increase considerably in some parts of the country, especially London, where prices rose by 12.3 per cent &#x; more than twice the UK average. Other strongly-performing regions were the East of England, where prices were up by 4.6 per cent, and the West Midlands (4.3 per cent).According to the LSL Property Services/Acadata index for January, house prices are now rising in 90 per cent of unitary local authorities. The index also reports an increase in transaction levels &#x; another sign of a strengthening market. In January, monthly sales were not only at their highest since the financial crisis began in 2007 but just 4 per cent below the January average in the decade before the credit crunch.David Brown, commercial director of LSL Property Services, attributes rising prices to growing demand and therefore hot competition for property, reinforced by low interest rates and the government&#x;s Help to Buy scheme. The rise in transaction levels, he believes, is largely attributable to a resurgence of first-time buyers, resulting from the wide range of attractive mortgage deals on offer, cheaper rates, and wider product choice.Says Mr Brown, &#x;The increase in new-buyer numbers has encouraged activity further up the ladder and inspired movement among &#x;second-steppers&#x;, which will prove vital in sustaining a healthy rate of sales activity.&#x;With mortgages still historically cheap and interest rates set to remain stable for the time being, we&#x;ll continue to see new buyers rush to the market nationwide. Even so, price growth and sales levels are still below their pre-crisis peaks, so we&#x;re still some way from the &#x;bubble zone&#x;.&#x;David Brown points out that, although the traditional hotspots of southern England and East Anglia have been first to reap the benefits of the recovery, a wider area, including the West Midlands, is now experiencing the effects of the ripple effect from London.Richard Tucker, managing director of Relocation Agent Network, the national network of UK estate agents affiliated to Cartus, agrees. &#x;Regionally, sales prices appear to be increasingly broad-based, especially when you compare London&#x;s housing market with the rest of the UK. In the capital, affordability remains the key challenge faced by those moving into the market and &#x; broadly speaking &#x; there continues to be a north/south divide in terms of property values.&#x;At Cartus, we continue to see an increasing number of buyer enquiries, although buyer behaviour would appear to remain price-sensitive.&#x;New homes growth The continuing recovery is also leading to an increase in the building of new homes. According to the National House Building Council, which provides warranties and insurance cover, the number of new homes registered in the UK in January showed a 14 per cent increase on the figure for January 2013.These first statistics of 2014 continue the upward trend seen throughout last year, which resulted in the highest number of new-home registrations since 2007. Estate agent and property adviser Savills predicts that housebuilding will rise by 55 per cent over next five years. Developers across all sectors, it says, are set to increase their output to 167,000 new homes per annum by 2018, supported by a steep rise in output from the public sector. This is still short of the 240,000 homes a year that are required to meet need in England, but a 55 per cent rise on the 2013 total of 108,000.Demand from housebuilders, Savills adds, is pushing up the value of residential development land across the UK at a rate not seen since 2010. Price growth continues to be led by the South East, but there are now &#x;early signs of life&#x; in key urban markets that have remained dormant since 2008, including Manchester and Birmingham.In the South East, greenfield values increased by 5.8 per cent in Q4 2013 and by 8.1 per cent between June and December. Well-located sites in areas like Oxford and Sevenoaks have already exceeded former peak values, while commuter locations such as High Wycombe and Reading are fast approaching their former highs.Help to Buy has been a catalyst for activity in lower-value markets, according to Savills. Marked land-price rises were recorded in Durham, Leeds and Sheffield, and there are signs of renewed market interest in some Birmingham and Manchester city-centre sites.Surging optimismGiven the widespread signs of recovery, it&#x;s not surprising that the all-important feelgood factor is also returning to the property market. The Knight Frank/Markit House Price Sentiment Index for January showed that more households than ever before were upbeat about the future value of their properties, with households in every region perceiving that the value of their home would rise over the next 12 months.It will be interesting to see if this general increase in confidence will lead employees to be more willing to take the plunge and make that all-important relocation move.It&#x;s worth mentioning that house-price rises are not universally welcomed. In its report The Housing Gap, Shelter, a charity for the homeless, found that homes had become more unaffordable in every local authority since 1997, and estimated that those on average earnings would need a pay rise of &#x;29,000 if they were to afford to buy a home.Rentals marketOver the last few years, the number of people wishing to rent rather than buy a home has grown enormously. Recent figures suggest that home ownership has fallen to its lowest level since 1987, while the number of households in rented accommodation has almost doubled.Savills&#x; director of residential research, Lucian Cook, says, &#x;Over the past few years, the government has introduced several initiatives to support home ownership, most notably the Help to Buy scheme. Yet, despite this, we expect the [private rented] sector to grow by a further one million households in the next five years.&#x;This increase in demand in the mainstream private rented sector has not been met with a similar increase in the supply of rental properties. This has resulted in rents being pushed up.&#x;In the mainstream markets, supply is likely to remain constrained, but less so in the more valuable markets, which is where new activity is concentrated and overseas investors are particularly active.&#x;Over 2013, we saw marginal rental growth in prime London but, given the recent increase in applicants and improved outlook and prospects for the economy, we expect this to pick up in 2014. From 2016 onwards, we anticipate rental growth to be increasing by 4.5 per cent per year.&#x;Meanwhile, north of the border, lettings portal CityLets says that, driven by Scotland&#x;s two major cities, Edinburgh and Glasgow, supply and demand have been in &#x;relative equilibrium&#x;. Time-to-let figures remain low, with a typical property being rented within a fortnight and one-bedroomed properties taking only nine days to let.While the average rent of CityLets&#x; 80,000 properties across Scotland and Northern Ireland is just &#x;678 per month, one Aberdeen postcode, AB12, has an average monthly rent of &#x;1,472, thanks to the thriving oil industry.Cartus reports that more employees relocating within the UK are choosing some form of rented accommodation as part of their relocation programmes. This is mainly because of an increase in short-term projects and assignments, coupled with a lack of properties available to purchase in a number of areas. As a result, the company is seeing an increase in demand for managed UK tenancy programmes.Among most Cartus clients, London is the top destination for expatriates relocating to the UK. Depending on family set-ups and budgets, Kensington, St John&#x;s Wood, Notting Hill, Clapham, Wimbledon, Chiswick, Richmond, Fulham, Putney, Shoreditch, Islington, London Bridge and Pimlico are popular. One- and two-bedroomed furnished apartments, particularly those with good transport links, are most sought-after by assignees.Outside the capital, places like Swindon, Newbury, Portsmouth and Aberdeen are currently popular for particular projects, Cartus says.Service sellsGiven continuing shortages of rented accommodation, letting agents are having to compete harder than ever for every new instruction. This is good news for prospective tenants.At the recent Cartus Relocation Agent Network annual conference, Silvia Eldawi, lettings director at West London estate agency Northfields, emphasised the importance of having a unique sales proposition. She pointed out that, as free market appraisals and web advertising were now standard, agents must find other means of setting themselves apart.One such way, Ms Eldawi said, was the use of videos on agency websites. Another was increasing agents&#x; social-media profiles and facilitating listings for mobile devices, which growing numbers of potential landlords and tenants were using to access the internet. Online signing of tenancy agreements and other documents was more convenient for tenants than visiting the agency, and improved the speed and efficiency of the deal process, to the benefit of the agent.But it isn&#x;t all about technology: a focus on service, to both landlords and tenants, is essential for agents who are keen to set themselves apart, Ms Eldawi reminded delegates.With high-quality service becoming a key differentiator, it looks as if relocating employees should find the process of finding and renting accommodation much easier than might once have been the case, despite ongoing supply shortages in some parts of the country.Looking ahead So how can employees on the move negotiate the booming property market and make a smooth transition to a new area?Says Relocation Agent Network&#x;s Richard Tucker, &#x;In our experience, relocating employees continue to set realistic asking prices on their properties, which lead to successful sales.&#x;In the rental market, as the number of tenants outnumbers available rental stock, relocating employees need to act quickly to secure the property they want. This is especially the case in major cities such as London, Birmingham and Manchester.&#x;Will the current boom lead to an inevitable bust? LSL Property Services&#x; David Brown sounds a note of caution. &#x;With greater economic prosperity, confidence between banks and lenders has been cemented further, which will no doubt fuel the engine of recovery in the months ahead, while, similarly, first-time buyers are set to swim further across the sea of adversity to secure a home.&#x;But it is crucial that both aren&#x;t scuppered and that the government&#x;s housing plans come to the fore with a continued focus on supply. This will ensure the recovery reaches the finish line and a generation doesn&#x;t get priced out of the market.&#x;&#x;See the Property section of Re:locatemagazine.com for news and practical advice, and join the property discussions at candgglobal.com