UK buy to let firm predicts property price rises of 10% in 2014

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January 4, 2014 2:11 AM EST

The UK residential housing market could see price growth of 10% this year to a chronic lack of supply, according to a prediction from buy to let investment specialists Assetz.

This comes after the firm successfully predicted 5% growth in the UK in 2013 which proved to be accurate. It also says that there is currently no solution on the horizon for the famine of new property instructions and added that small and medium sized builders remain strangled by lack of funding.

‘Property prices are set to grow by 10% in 2014. In 2013 the headlines have centred on price growth in London but next year we will see the rest of the country fighting back,’ said Assetz chief executive Stuart Law.

‘Well established locations in city centres and suburbs accounting for around 85% of residential property, where employment is high, will see strong price growth. However, in the 15% of areas where employment is low and economic conditions are poor, prices will continue to be suppressed,’ he explained.

He also pointed out that there is no real answer to the problem of undersupply of new homes in the UK ‘While large house builders’ balance sheets have recovered very nicely their output has not been able to make a significant dent in the supply deficit. Small and medium sized house builders continue to be strangled by a lack of funding,’ he said.

‘While some intend to increase the number of homes they are building next year by up to 200% this is just skirting around the edges and will not solve the housing deficit crisis. Around 350,000 new homes are needed per year to have any impact on property price growth but I doubt this figure will even reach 150,000 housing starts next year,’ he added.

According to the firm’s analysis at the start of 2013 average yields in city centres for investors were 8% to 8.5% but by the end of the year were around 6% to 7.5%. In 2014 they are expected to be around 7.5%.

‘This is because we are now at a stage where property price growth will far exceed rental growth. Without the necessary injection of supply, to temper property price rises, yields will be suppressed,’ explained Law.

‘Any government intervention in whatever form that will make things easier for small and medium sized builders is welcome. Encouraging institutional lending or fully relaxing current strict planning laws, and removing the need for lengthy appeals planning processes, would make a real difference to small builders,’ he added.

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