Property Prices Fall, yet the Future looks Positive

There seems to be a number of conflicting articles in the news right now about the state of the property market. Since the introduction of the second phase of the Help to Buy scheme – where properties worth up to £600,000 were to be included – the property market has seen a boom in demand. However, according to the property website RightMove, asking prices in November dropped by around 2.4 per cent.

Even though there has been a huge amount of interest in the Help to Buy scheme, there are reports that many applications are not being accepted, leading to the market failing to improve as much as hoped. There is also the fact that in the lead up to Christmas property markets usually start to stagnate, or those that are trying to sell in a hurry lower asking prices in order to speed up the process. Even with the Help to Buy scheme these two situations are still having a negative effect on the property market.

There is good news however; compared to November 2012 the market is much stronger, with asking prices around 4 per cent higher than the previous year. Furthermore, the dreaded housing bubble that many thought would be a result of the Help to Buy scheme has not surfaced. Discussing the market, Rightmove’s director and housing market analyst Miles Shipside said “Those fearing a return to a credit-fuelled bubble will be reassured by the teeth of the new rules and how they are clamping down on the aspirations of some of the early applicants into the Help to Buy mortgage arena.”

“While there is a processing time-lag, and we need time for both the Help to Buy scheme and the mortgage market to settle down, the feedback from agents seems to be that you have to be squeaky-clean and the chances of being approved are better with at least a 6% rather than 5% deposit.” Shipside went on to add that even though the Help to Buy scheme may not be as beneficial as once expected, that many in the industry are expecting a profitable 2014.

“Estate agents expect a more buoyant 2014 as they pick up early signs of an increase in buyer interest and demand, so this side of Christmas could be the time for eager buyers to hunt out keen sellers and do a deal,” said Shipside. A number of letting and estate agents also agree with this opinion, and there have even been reports that state in five years’ time property prices could increase by twenty four per cent.

Just one day after the Bank of England’s Governor Mark Carney announced that economic recovery had started to take hold in the UK, forecasts came out reporting the expected increase. Discussing the news, Liam Bailey from estate agent Knight Frank said: “For the first time in five years, we can be broadly positive about the UK housing market.” He admitted that the Help to Buy scheme has played a part, but added: “At the same time, the economy has been growing more strongly than economists expected.”

“Price growth is encouraging transactions, contributing to labour mobility, and first-time buyers are able to access the market in a way they couldn’t 12 months ago. The improvements are not limited to London.” Meanwhile, Brian Murphy, head of lending at the Mortgage Advice Bureau, said: “The arrival of Help to Buy has been an integral part of improving the outlook for the wider property market. Both the equity loan and mortgage guarantee options have got off to an impressive start. It is very much early days in assessing its impact overall but it has clearly had a positive effect.”

For landlords, this means that their current investments will be even more profitable in the next few years, and the risk in the market will start to decrease. This could even lead to landlord insurance policies and mortgage interest rates reducing in price, meaning that the private rental market will also be expected to see an increase in wealth over the next five years.

Even though property prices are falling right now, it is widely agreed that the property market, along with the UK economy as a whole, will soon see a well-needed return to its previous state. For all that are involved in the sector this is much welcomed news, news which has been hoped for since the beginning of the recession.

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