2013 Property Outlook: Foundations For Further Recovery
The Bank of England recently cut its growth forecast for next year to around 1% and whilst economists rarely agree on the precise forecasted data, the majority broadly agree with the Bank’s statement that the recovery will be “slow and protracted”. Given this downbeat economic backdrop, home.co.uk considers what needs to happen to ensure that the UK property market continues to recover in 2013.
In 2012, average UK house prices rallied strongly, driven largely by the performance of London, the South East and East Anglia. As such, 2012 may be regarded as a landmark year in the slow recovery of the UK housing market. Despite public sector cuts, rising living costs, wage freezes and rises in unemployment, property prices were at last increasing more or less in line with inflation. Whilst so-called ‘green shoots’ are evident in some sectors of the UK property market, this re-growth remains very vulnerable and highly dependent on worldwide economic pressures. Hence, there are a number of variables that need to fall into place, to ensure a continued recovery.
1. Growth needs to be beyond London; recovery in regions outside of London and the South East is vital to the overall health of the UK. So far we have seen stimulus in the South and austerity in the North. This imbalance must be redressed either through increased industrial output in the North and/or government policy.
2. Interest rates and inflation must remain low; given the widespread affordability issues, both interest and inflation rates must be maintain at a low level. Whilst futures markets are pricing in interest rate rises in 2017, giving considerable time for improvement in the UK property market, the Government is seemingly struggling to control the UK budget deficit. As the UK’s coveted triple-A rating is under threat; the worst case scenario would be a sudden run on the pound, prompting a rise in interest rates to avoid devastating inflation.
3. Taxation must not increase; the UK economy is vulnerable to the actions of the UK Treasury. Further tax increases, when take-home pay is flat or falling and real disposable income is under severe pressure, will damage confidence among potential home-buyers even further.
4. Cautious approach to QE3; the MPC appear to wax and wane on the issue of stimulus funding but caution is understandable. There is a limit as to how much this economic emergency first aid can be used given that 25-30% of government debt is already held by the Bank of England. Moreover, proxy purchases of gilts by banks and building societies propped up by loans from the Bank of England mean that, in reality, this figure may be far higher.
Doug Shephard, Director at Home.co.uk, summarises; “”With absolute lending levels still restricted and the general economic outlook still very much on the downside, we expect vendors to remain under pressure to negotiate on asking prices. Therefore, as we move into 2013, only prices in sought after local markets will show marginal price rises whilst other areas will remain stable at best. The overall likely impact, on a national level, will be an average rise in asking prices of 2-3%.
“The market reality remains that good quality, sensibly priced stock in a sought after areas are selling reasonably quickly whilst other stock is subject to low offers from investors looking to take advantage of a stronger rental market. Only an improvement in GDP and employment will ensure continued and more consistent recovery across the UK.”
Over the last 16 years, Home.co.uk has become established as a dynamic, innovative and ethical service. By providing the UK’s most comprehensive Property Search Engine (which finds and tracks around 1,000,000 properties for sale and rent) and Estate Agents directory coupled with detailed House Price and Rental analysis, Home.co.uk delivers the real power of the Internet to inform and empower estate agents, homebuyers, renters, landlords and sellers in across the UK. To learn more about Home.co.uk please visit: http://www.home.co.uk/company/about.htm