They also noted there was no solution on the horizon for the famine of new property instructions, with small and medium sized builders remaining strangled by lack of funding.
Stuart Law, Chief Executive of the buy-to-let specialist Assetz, examines the outlook for the UK housing market:
“Property prices are set to grow by 10% in 2014. This year the headlines have centred on price growth in London but next year we will see the rest of the country fighting back. 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.
“There is no real answer to the problem of undersupply of new homes in the UK. While large housebuilders’ 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 housebuilders continue to be strangled by a lack of funding. 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.
“At the start of this year average yields in city centres for investors were 8 - 8½% but now at the end of the year are more around 6 - 7 ½. Next year we will see city-centre yields to be around 7 ½%. 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.
“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.”
