What 2014 holds for the property market

PUBLISHED: 11:08 23 December 2013 | UPDATED: 11:08 23 December 2013

Family moving house

Family moving house

(c) Monkey Business Images

It’s official. The housing market is out of the doldrums, but what does the coming year hold for buyers and sellers alike? Here are the predictions of leading estate agents

Ask any estate agent in Buckinghamshire and Berkshire what sort of a year it’s been and they’re likely to tell you it’s finished on a much better note than it began. That’s because for the first time in two and a half years, positive growth was recorded across all the prime regional residential markets in England during the third quarter of 2013.

While the affluent Home Counties have not suffered the huge downturn in the housing market that many areas have since 2008, it hasn’t all been plain sailing for buyers and sellers in the region. Estate agents Savills’ research shows there has been a significant difference between the extents of the recovery inside and outside of the London commuter zone, with prices of prime property beyond the commuter zone typically still some way below their 2007 peak.

Householders’ expectations mirror this, according to Knight Frank. Their recent survey shows that 76.7 per cent of homeowners in the South East expect the value of their home to rise over the next 12 months.

At the top end of the market the 40 per cent increase in stamp duty on homes of over £2million last year has had a marked effect on transaction numbers and prices. Some agents, like Romans’ Managing Director Peter Coles, foresee this continuing. “This is no surprise when you consider that it would cost the equivalent of over £130,000 of salary before tax to pay the Stamp Duty Land Tax bill on a £1.5m purchase price!” he says.

Stephen Christie-Miller, Head of Savills Henley, is however, slightly more optimistic in this field. He says: “We have recently seen a number of sales above £2 million, indicating that people are beginning to come to terms with the seven per cent stamp duty threshold.” He does, however, sound a note of caution, concluding that: “Properties do remain price sensitive with purchasers in the current climate only prepared to part with their money for the right product in the right location at a sensible price.”

As for homes with a value of between £750,000 up to £1.5 million, the picture is much brighter. Demand for quality properties and, in particular, for property in central locations, continues to outstrip supply, as it has done for the last five years. It’s no surprise, therefore, that when something very appealing comes to market in a good location, there’s usually a clamour to secure it, often with purchasers bidding competitively.

Tim Russ, partner at Tim Russ & Co. with six branches in Buckinghamshire, predicts that 2014 will be another very busy year in the £800,000 to £1 million sector. “There’s a very strong demand and we’ve seen rises of as much as seven to eight per cent already here.”

Not surprisingly with the general return of confidence in the autumn, the market has certainly gathered pace. Says Stephen Christie-Miller: “Our office has seen a significant uplift in enquiries for property available for sale – especially from London purchasers, keen to capitalise on the size of property and plot they can afford by comparison to London. In addition, purchasers are drawn to Berkshire, Oxfordshire and Buckinghamshire by the quality of life which can be enjoyed, the excellent selection of schools as well as the superb transport links.”

David Tate of Davis Tate is also quietly optimistic about 2014, especially around the middle rungs of the property ladder. “We’re anticipating business as usual… plus a little bit more!” he says. He adds: “We are fortunate to be in a strong local economy, and to benefit from the booming London market; we meet London sellers at all levels, who are cashing in on the strong city market, and using our excellent commuter links, plus flexible working patterns, to make a new life in the country.”

Lower down the housing market, the government’s Help to Buy scheme will have an undoubted impact for first time buyers and on would-be landlords. With a return of confidence to the market, there has also been concern that a “bubble” may be being created, and indeed fuelled, by the second part of the scheme that will effectively “underwrite” higher loan to value lending (up to 95 per cent), enabling many more people to get on the property ladder. All the same, some lenders still seem reluctant to sign up to the scheme. And besides, the chronic shortage of new homes lies at the root of the housing problem and this cannot be alleviated in the short term.

While most people are predicting that house prices will increase throughout 2014, Romans’ Peter Coles anticipates that the most significant rises will be in one and two bedroom properties. “This will be due to increased demand from first time buyers, aided by the Help to Buy schemes and Buy to Let investors,” he says. He adds: “This is positive news for ‘second-steppers’, as the demand for their properties will make it easier for them to move up the housing ladder. Landlords and investors will also see a great return with significant capital growth on top of already strong rental yields.”

David Tate agrees: “More first time buyers are bringing out more first time sellers; people who can now move on to their next house, either using HTB themselves, or finding a buyer using HTB,” he says.

Another spin-off of market conditions has been an upsurge in the lettings sector. “Interestingly,” says Tate, “we are seeing record months for letting too, and this apparent contradiction in the market is becoming the norm. Many downsizers are investing in property, buy to let mortgages are easily available, and there is still a very good supply of tenants; not everyone wants to buy.”

So, looking ahead, are Berks and Bucks estate agents rubbing their hands with glee and looking forward to a return to the halcyon days of the ‘mid noughties’? In short, no, although there is a quiet optimism.

Peter Coles says: “I am not predicting a property bubble; allowing for inflation, prices in the South East are still 10-20 per cent below where they were in 2007, and because interest rates are so low the key driver, affordability, is still below the long-term average levels (from the last 30 years). This means that even if rates increase a little over the next few years this would not cause a problem.”

A recent survey by Hamptons International has also shown that previously nervous or frustrated would-be buyers are coming into the market at last. “Paradoxically,” says Research Director Fionnuala Earley, “this is good news for both buyers and sellers. Further price rises, as predicted by this measure, should encourage more people to put their property up for sale and an improvement in supply will foster a more liquid and therefore a more stable market.”

They do, however, sound a note of caution. “While sentiment among buyers has undoubtedly already improved, this should not detract from the fact that sellers need to remain realistic on pricing.”

Latest from the Berkshire Life