Consolidation in UK Property Market
February 21st, 2006
The latest figures from the Office of the Deputy Prime Minister (ODPM) indicate that the UK property market has found a level of encouraging stability after a turbulent 2005.
The mix adjusted average house price in the UK in December was 185,788 GBP’s, which is just 60 GBP’s down on the figure for November. Bearing in mind the usual seasonal slowdown, this reflects a healthy property market and investors can once again be optimistic about their investment projects for the coming months.
The ODPM survey is based on 40,000 completed sales and it is generally perceived as a significant gauge of the general state of the property industry.
Accordingly, investors have been taking note of the fact that house price inflation was found to have increased in both England and Scotland, while the market in Wales saw a slightly surprising downturn.
Regional variation is becoming an increasingly important factor in property investment, with the patterns less predictable than might be expected.
While house price inflation rate was a steady 3.8 per cent in London, better options for investors may be the north west of England which saw 7.6 per cent and the north east which saw 6.5 per cent. There is currently great demand for residential property in Manchester and Liverpool, with student accommodation in both cities also boosting the buy to let sector.
Yorkshire and the Humber area witnessed a similarly impressive inflation rate of 6.3 per cent but other areas within England fared less well.
A fairly stagnant year in the property market in the West Midlands saw an inflation rate of just 1.8 per cent while a lack of activity in the south west was reflected in an even worse rate of 0.8 per cent.
Regions in the south east of England, meanwhile, saw an inflation rate of 0.3 per cent and the east was the worst performing area at 1.3 per cent.
With the national annual rate of house price growth up to 2.9 per cent in December from a revised 2.2 per cent in the previous month, the new figures back up recent reports from a number of commercial banks.
Yorkshire Bank recently found that 20 per cent of first time buyers are now prepared to pay a premium for a property to gain a footing on the property ladder while only 13 per cent would have done the same thing 12 months ago.
According to the Nationwide building society, house prices increased by 1.4 per cent in January, which is the biggest monthly rise since July 2004. This figure also indicates that the rising confidence in the final quarter of 2005 has been carried over into 2006, though it will be another month before the ODPM reflects on the market in January.
A significant stretch of 2005 proved extremely challenging for many UK investors with a clear dip in buyer confidence meaning that too many people were backing out of deals or waiting for some form of a market crash.
The crash never materialised and this recent data indicates that impressive returns can again be found on properties in the right areas. The National Association of Estate Agents (NAEA) has pointed out that sales figures have now reached levels comparable with those in 2002 and 2003 and most experts are predicting house prices to increase by three to five per cent during the year.
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