Member Article

Yorkshire housing market to grow by 3 per cent this year - Knight Frank

According to the latest Knight Frank research, the mainstream residential sales market in Yorkshire and Humberside will grow steadily, with prices predicted to rise three per cent this year, followed by two per cent in 2016 and 2017.

Tom Storrar, associate in Knight Frank’s Yorkshire valuation department, commented: “The main housing market theme in 2014 was price growth beginning to ripple out from London into the regions. This was underpinned by employment growth and the return of above inflation wage growth, allied to continued low mortgage rates.

“As we move into spring this year the picture has shifted, with all UK regions seeing lower rates of growth. While buying intentions are relatively high, there is less conviction that prices will rise strongly this year. Nationally, just 45 per cent per cent of households expect the value of their home to rise over the next 12 months, compared to 55 per cent in this time last year.

“The drivers for this weakening appear to be two-fold. Firstly, affordability constraints mean it is difficult for buyers to keep bidding prices higher without on-going strong growth in earnings. Secondly, the Bank of England has created a more stable lending environment, with tougher affordability tests being placed on mortgage applicants – squeezing lending and reducing activity.

“Looking ahead the market should remain supported by economic growth and expansion in employment, lower oil prices ought to underpin low inflation which should aid household budgets, and at the same time the new stamp duty regime should boost transactions, with most people paying a reduced rate of tax,” said Mr Storrar.

Mr Storrar reported that Knight Frank’s Yorkshire residential valuation team had had a busy start to 2015 with some interesting instructions ranging from small buy-to-let portfolios to much larger residential blocks and substantial development sites across the region.

“We have also been involved with a good deal of development consultancy work. This has included office-to-residential proposals and conducting viability appraisals to advise developers and Local Planning Authorities in relation to proposed planning conditions and their impact on residual site values and profitability.

“We have encountered refreshing optimism when dealing with Banks, Borrowers, Developers and Estate Agents which suggests a healthy residential market and provides encouraging signs of things to come for Yorkshire,” he explained.

According to the Knight Frank/Markit House Price Index, there has been a narrowing of the North/South price growth gap, where the margin between the readings for London and the North East is close to a two-year low. Growth rates are predicted to become more homogenous across the country in the short to medium term.

Mr Storrar said: “Interest rate rises and the risk of a renewed economic slowdown remain the biggest risks to the UK housing market. Our expectation is that the Bank of England base rate will rise to hit 0.75 per cent by Q4 2015, and 1.50 per cent by Q4 2016.

“A more rapid rise would translate into higher mortgage rates, putting pressure on current borrowers, and reducing the ability of new buyers to purchase at current pricing levels. Rising rates are likely to make alternative investments more attractive, and could prompt investors to look less favourably on low-yielding property investments,” he added.

This was posted in Bdaily's Members' News section by Robert Beaumont .