2013 is likely to be another challenging year in the UK housing market, however there will undoubtedly be opportunities for those who are willing to make tough decisions. As with all areas of life, there are no guarantees, although bricks and mortar will always be a good investment as long as you get the timing right!
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At the very beginning of a new year it is only natural to reflect on the year that has gone and to think about what the coming year has in store for us. This is particularly relevant for those who are looking to either take their first steps on the housing ladder or for those who are already on the housing ladder and for different reasons are looking to move. In a slow moving, stagnant or even contracting economy (depending on which statistics you believe), the decision on when to take this step or make this move is difficult.
The term ‘affordable’ has taken on a whole new dimension over the last 30 years where the average price of a house in the UK has increased from £25,580 in 1982 to £163,910 in Q3 2012 (Nationwide 2012). With many lenders now requiring a deposit of around 20% it is not difficult to see why so many first time buyers are struggling to enter the market. This then has a knock on effect further up the property ladder as those looking to move from their first purchase are severely hampered by the lack of first time buyers and this is then replicated even further up the chain. The outcome of this is a housing market which is gasping for air as it struggles to show any life. Developers demonstrate a lack of confidence in the market by delaying or mothballing new house building projects, even some which have already obtained planning permission! This in turn restricts supply as developers are reluctant to build houses which they will struggle to sell. The whole thing is a complete mess, however will things get any better in 2013?
Simon Rubinsohn Chief Economist at RICS makes the following assessment in the RICS 2013 Housing Market Forecast:
‘The average house price in the UK looks set to rise by a further two percent next year, despite the uncertain outlook for the economy. More positively, the amount of sales going through should also see an increase across the country, climbing to its best level since 2007, as the Funding for Lending scheme helps boost the availability of mortgage finance.But these tentative signs of recovery in the sales market should not blind us to the very real problems that still exist. Even with the Funding for Lending scheme and some other government policies beginning to be felt in the mortgage market, many first-time buyers will continue to find it difficult to secure a sufficiently large loan to take an initial step on the housing market. Meanwhile, the alternative of renting is becoming more and more costly with a further increase in rents likely in 2013. Critically, the government needs to ensure that the conditions are in place that will enable the stock of new housing, whether for purchase or rent, to rise more rapidly.’
It is clear that there is never a ‘perfect time’ in the housing market, and in reality the ability to be able to join or move in the housing market will usually come down to availability of finance, being brave enough to take a leap of faith and sometimes pure luck! We only become aware of favourable (or not so favourable) market conditions after the event and it is these moments that we are striving to predict. History shows us that many of those who purchased houses at the height of the market in 2007 are now in negative equity and with hindsight we are able to look back and see that for many this was not a good time to purchase. Unfortunately, the future does not give us the benefit of hindsight, so we make our decisions based upon what we hope will happen.
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