Let the good times roll. After years of average performance since 2008, this year saw the British property market roar back to life. According to Halifax, prices rose by 7.7 per cent across the country as a whole. In London, the figure was more than 10 per cent. Elsewhere, growth was not so strong – parts of the North and the West Country, in particular, might ask when this economic recovery is going to arrive. But in general, 2013 was a success story for British property. What will 2014 bring? Whether you are a first-time buyer or a foreign billionaire, here is what the next 12 months have in store.
Rising tide
The general agreement is that next year will bring more of the same for homeowners. “It will be another good year for property prices,” says Doug Shephard of home.co.uk. “Increased confidence will no doubt produce extraordinary price rises. Regional disparities that exist will continue to play out, and may well be exaggerated further by the Government’s blanket implementation of Help to Buy.” Savills agrees that 2014 will see a continued increase in prices, with Greater London catching up with prime central London. It expects the commutable area around the capital to increase by five and six per cent, with central London rising three per cent. The rest of England and Wales will see a three-four per cent increase, with Scotland lagging behind at one per cent.
With an increasingly limited supply of properties and ongoing demand, it could prove a popular year for making a change. “We have experienced a 21 per cent year-on-year increase in traffic, ” says Miles Shipside of Rightmove. “With mortgages still historically cheap and interest rates set to remain stable, if you’ve been putting off a good reason to up sticks, it could be opportune to make 2014 the year to move.”
Regional opportunities
Some of the heat from the capital should radiate out into the countryside, with old favourites being the first places to feel the benefit.
“I am predicting a strong bounce-back in the provinces,” says Andrew Turner of Smiths Gore. “It will start with traditional hot spots such as the Cotswolds, and North Yorkshire. Still below its 2007 peak in many areas, the average value of a country house now looks incredibly reasonable against a prime London apartment. By the end of 2014 the country house market should be fully back on track.”
In other words, the spring could be a great time to go for that investment-cum-country-house you have had your eye on.
“We are seeing people take advantage of the capital growth from London,” agrees Rupert Wakley of Knight Frank. “They are making the move towards the Cotswolds, where their money goes further.” Wiltshire, Stratford upon Avon and Leamington Spa all offer good value, according to the agent. Others are tipping Chester, in Cheshire, for a good year.
Rental round-up
Rental prices are rising more slowly than purchase prices, particularly in the most sought-after areas. In prime central London, rental returns are often below three per cent. But renters feel the strain much more keenly than owners. Rent leaves your bank account every month, while a rise or fall in the value of your house remains theoretical. Sadly, 2014 does not bear many glad tidings for renters. Mark Carney, the Governor of the Bank of England, has said that he will only consider raising interest rates when unemployment falls below seven per cent – unlikely next year.
Capital views
The big news in the Autumn Statement was that capital gains tax is being introduced on foreign owners from 2015. While there is a slight chance that this will have a negative impact on the market, most experts think that London will continue to tick along.
“It’s an easy and populist win for the Chancellor, George Osborne,” adds Turner. “It closes what many will see as a tax loophole. This is unlikely to have much impact on the market.” Fionnuala Earley of Hamptons International agrees. “The Chancellor is keen to be seen to be doing something to cool rapid house price growth in London, but in reality the proportion of foreign buyers is smaller than one might think. Seventy per cent of buyers in London are British nationals, and most of the remainder are resident.”
Overall, there is a sense that the super high-end London market, for homes above £5m, might be levelling off. A house in St John’s Wood, north-west London, recently had its price cut by £30m, from £65m.
“With prospects for global economic recovery improving, yields on other assets are becoming more attractive, and foreign investment is being pulled away from prime London housing.”
As the market levels out, buyers will become more exacting about what they are looking for. “They will be less likely to compromise,” says Robert McGregor of Seqoya. “Developers need to focus on quality and select location carefully.
“The current pipeline of central London development now looks matched to the predicted demand. This is unchartered territory for the sector. Global instability could shift the balance back in London’s favour, but it’s important to bear in mind that international sentiment can be fickle.”
Development hot spots
While the ultra-prime sector may be slowing down, the rest of the London market is roaring ahead. The parts of the map that were once blank are being filled in by smart new developments.
Perhaps the most high profile work is at Nine Elms, on the South Bank, where the revamped Battersea Power Station will be at the heart of a £4bn regeneration. When complete, the development will include 16,000 new homes. While they will not be completed within the next 12 months, during this period the serious building work will begin.
“Of particular note is the proposed extension of the Northern Line which will include new stations at Wandsworth Road and Battersea Power Station,” explains Jonathan Mount of The Buying Solution. “This will dramatically reduce journey times to the City. With the new American Embassy, high-end residential schemes, restaurants, schools and parks, it is no wonder that investors have their eyes keenly focused on this area.”
More diggers and cranes may be heading to Croydon, where plans for a £1bn project, led by a new Westfield shopping centre, has created a wave of interest. Over 2014 the developers will hope to receive outline planning permission, and can then go about buying up the land they need. Forward-thinking investors might want to take a punt soon, before buyers flock to the new hot spot and push up prices.
Stratford was supposed to become a new wing of prime London in the wake of the Olympics. While price progress has been slower than some hoped for, there are still thousands of smart new homes in the pipeline. The athletes’ village is being converted into 2,800 apartments, and the basketball court is being turned into 850 new homes. At Strand East, 1,200 homes being built by LandProp should be finished by the end of the year. Great transport connections and proximity to Canary Wharf, mean Stratford continues to be an area to keep an eye on.
There will be unexpected success – and failure – all across the globe. But in the wake of a thumping 2013, market-watchers can be confident that, for the first time in years, plenty of hot property action will be taking place right on our doorstep. Whether you are a first-time buyer, a millionaire landlord or simply a homeowner with a mortgage, you can guarantee that the next 12 months will be anything but dull. If the general consensus can be believed, you might even make some money.
For sale
Gloucs
House prices in the Cotswolds – particularly of properties within easy reach of London – are expected to do well next year. Elm Tree House, in Ampney St Mary, near Cirencester, is a prime example. It has four bedrooms, three bathrooms, spacious living rooms and extensive gardens. The house also comes with permission to convert the coach house into living space. £995,000, Butler Sherborn (01285 88374).
North Yorkshire
Redmire Farm, near Hawkswick, is a Grade II listed farmhouse. It has three bedrooms, two bathrooms and period features, including open fireplaces. £595,000, Hunters (01756 700544).
Battersea
Spacious five-bedroom family home with a south-facing garden. Located on a quiet residential street, moments from the shops of Clapham High Street. £1.55m, Hamptons International (020 7411 9965).