In this week’s blog post we look at some of the aspects that are contributing to the revived confidence in the UK property market and the possible effects it could have on property investment.
A return to increasing house prices
House prices in the UK jumped in January as property experts point to the so-called ‘Boris bounce’ as a reason for growing investment pushing up prices.
After Boris Johnson’s decisive election victory in December, Nationwide says that house prices rose at their fastest rate in more than 12 months to hit a 1.9% annual rise in January.
Nationwide says that house prices rose by 1.4% in December – and that came after 12 consecutive months that saw growth below 1%. The last time house prices rose above that waterline was in November 2018, when they grew by 1.4%.
Homebuyer mortgage approvals rocketed
The lender also points to UK Finance figures showing that homebuyer mortgage approvals rocketed by 24% in the weeks before Christmas as another sign for strengthening investment.
However, Nationwide’s chief economist Robert Gardner says that January’s house price growth should be viewed ‘cautiously’.
He explained: “The housing market’s underlying pace has remained broadly stable with the number of mortgages being approved continuing within a fairly narrow range that has prevailed over the previous two years.
“Low borrowing costs and a healthy labour market appear to offset the drag from what is an uncertain economic outlook.”
Data from the Office for National Statistics (ONS) highlight that house prices rose by 2.2% in 2019. The ONS says that this is the first time in two years that all regions have seen prices increase.
PwC economist Jamie Durham told one national newspaper: “London price growth has rebounded. This may suggest an end to the North-South divide for house price growth.”
Brickowner’s CEO: ‘A new sense of confidence has rebooted the market’
Fred Bristol, Brickowner’s CEO, said: “It comes as no surprise that a new sense of confidence has rebooted the property investment market, we are seeing a release of pent-up demand in the aftermath of the election. 2020 has already seen the ‘green shoots’ of a new cycle for the UK’s property sector begin.”
The impact of the confidence within the market
The impact of post-election confidence might help explain why investors should feel reassured about future house prices, a survey commissioned by property portal Zoopla reveals.
The clear indication from the survey of estate agents and members of the public is that not only is property confidence on the up – but it’s higher than it has been for three years.
Indeed, the strongest confidence is among estate agents in the north of England, where 57% of them state that this is the most confident start to a year that they have seen for several years.
In the south of England, agents say they are feeling ‘very confident’ about how the market will perform over the next 12 months.
Why a revived confidence in the UK property market could be good news for investors
While most property investments rely on adding value via development to secure returns for investors, a return to positive capital growth (in the form increasing house prices) could also increase returns, as the value of the property or asset may rise during the term of the investment.
Combining this with lower borrowing costs for buyers, and a positive outlook from estate agents could help boost the property market out of the slowdown that it has experienced over the last two years. The knock-on effect for property investment could see investor returns increase concurrently.
UK Finance data
Nationwide House price data
Zoopla agent confidence hits 3-year high
ONS house price index