In a report published by the Royal Institute of Chartered Surveyors (RICS) in December the professional body sets out its expectations for the property market over the coming year. The main arguments and insights of the report are outlined here.
From difficult lending conditions to ever increasing rental rates, the housing market has remained under considerable strain ever since its crash in 2007. However, in its report the RICS indicates that the market may well have turned a corner and cautiously suggests 2013 may offer a more favourable outlook.
A good indicator of a healthy market and a litmus test for consumer confidence is the number of property transactions that take place over any given period. Reassuringly, HMRC report that in 2012 the number of property transactions rose to its highest level since 2007. Whilst this does suggest the market is moving towards recovery, to put this in context, the total number of transactions logged in 2012 is still down 40% on the number of transactions recorded before the crash. Those areas expected to see the greatest increase in transaction levels include London, the South East, Wales and the North West.
Difficulties in the lending markets and issues surrounding the availability of credit still persist despite lenders introducing improved offerings and lower interest rates towards the end of 2012. As a result the demand for rental property remains strong and it is expected that this will continue to be the case throughout 2013.
In its report the RICS stresses that whilst supply of rental property is also on the increase there will continue to be a shortfall, leading the RICS to predict an average rise in rental rates of 4% in 2013. There is likely to be some regional variation around this figure but it is not expected that any part of the country will see a fall in rental rates.
Despite the crash and a fall in house prices over recent years residential property still remains expensive. The house prices to income ratio remains approximately 30% above the long-term average and this means the multiples required to purchase a house are often not achievable given current lending conditions.
The house prices to rent ratio also remains high continuing at 15% above the long-term average. It is expected that this ratio will fall in future but it is anticipated this will occur through a rise in rental rates rather than through a decrease in house prices.
At a national level the RICS forecasts that house prices will rise by an average of 2%, however there will be regional variation around this figure and some areas, such as those suffering from high levels of unemployment, may see prices remain stagnant or even fall slightly.
Despite the Council of Mortgage Lenders (CML) recently reporting that a quarter of all mortgages taken out at the height of the market are now in negative equity, the picture surrounding repossessions is improving and 2013 looks set to see some of the lowest levels of repossessions since the market crashed.
The number of borrowers falling behind with payments is decreasing and the total number of mortgages in 3 month arrears fell over the course of 2012 to its lowest level since 2008. Tracking this decline, the number of possession claims also fell last year to its lowest level since 2002. Looking forward the RICS predict the number of properties to be repossessed to fall to 33,000 over the course of this year. If this prediction proves correct this would be the first time the number of repossessions has fallen below 35,000 since 2007.
Holmes & Hills in Sudbury offer conveyancing and residential property services from five offices across Essex and Suffolk. Holmes & Hills offices are located in Braintree, Halstead, Sudbury, Tiptree and Coggeshall.
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