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House prices jump as supply plummets in UK housing market
May 14, 2014Article by Ray Withers
The UK housing market, just like all other goods markets, is susceptible to the age-old laws of supply and demand when it comes to price. Now, the latest figures from Halifax and the Royal Institution of Chartered Surveyors (RICS) have shown just how much of an impact these two factors can have when it comes to the UK’s buy-to-let sector.
Halifax’s most recent data has revealed that UK house prices were 2.3% higher in the February to April 2014 quarter than in the preceding three months. The figures put prices in the three months to April as 8.5% higher than in the same period during 2013. Meanwhile, HMRC data has shown that the volume of home sales in March 2014 was 29% higher than in March 2013.
The figures demonstrate the swift growth of the UK market, with demand driven by a range of factors. UK purchasers’ increased trust in the market, a spike in investment from overseas thanks to global considerations (such as Russians’ current keenness to invest their money in the UK or France’s 75% tax rate for high earners driving them out of the country), are both behind this impressive growth.
Another hugely relevant factor when it comes to the UK market is the ongoing problem of lack of supply. Despite the Markit/CIPS construction PMI revealing that housing construction grew for a 15th month in April, making this the longest continuous growth period since 2006/07, the latest RICS survey has revealed that April 2014 was the fourth consecutive month to show a fall in the number of properties actually coming onto the market.
While the upper end of the market has been booming, with the number of £1m plus homes now 50% higher than back in November 2007 – pushing the number of ‘property millionaires’ over 500,000 by the end of 2014 according to analysis conducted for the Telegraph – both the average UK family and first-time buyers are finding it increasingly difficult to purchase the kind of home that they need.
Buy-to-let market booming
The result is an immense boom in the UK’s buy-to-let sector, where the new developments that are coming on line are being snapped up almost as fast as investors hear about them. Ray Withers, Chief Executive of specialist property investment company Property Frontiers, comments,
“We’ve seen incredible demand for buy-to-let properties in the UK over recent months. Our iconic Birmingham apartments are a prime example. The luxurious, modern properties, which start from as little as £104,500, are selling out incredibly fast – we now only have a few units remaining. Our Bradford city centre apartments, available at up to 25% below market value, are proving just as popular.
“This is a real case of watching the opposing forces of supply and demand at work and as a property professional it’s fascinating to see the impact that these factors are having on the market. Of course it’s also extremely gratifying to know that Property Frontiers’ clients are able to benefit in two ways from these market forces, with both capital growth and strong rental returns achievable from UK buy-to-let property.”