Aldermore Commercial Market Report: 2014 Predictions

2013 has been a vintage for the British housing market. For the first time since the financial crisis, house price growth was strong. In November, a survey by the Halifax showed that average UK house prices stood at £174,910 – an annual increase of 7.7 per cent - although this was skewed by London.

Government schemes like Funding for Lending and Help to Buy have contributed to this. Both have been a shot in the arm for the industry, but perhaps even more crucially, they have restored confidence to the housing market for the first time since the beginning of the housing crisis in 2007/08. 

2014 Predictions

Firstly, it’s clear that demand for houses will continue to grow. According to a national housing survey earlier this month, there’s been a 10.2 per cent jump in the demand in the last six months. This is significant, and I fully expect this to grow over the next six months.

Also, residential investment will increase, as will the commercial mortgage market. Help to Buy 2 has already launched; Aldermore is one of only two lenders offering remortgages as well as house purchases under the scheme. This scheme will help existing homeowners move up the housing ladder which allows more properties be freed up for first-time buyers to move into.

In 2013, customers were afforded greater choice and more information about mortgage products. This meant lenders had to devise more innovative products for customers. Now mortgages won’t just be about rates and LTV. For lenders to entice more customers, greater emphasis must be placed on relationship management.

Increased demand has meant house prices have gone up. In London alone, prices have soared 12 per cent year-on-year, according to the ONS. As even more lenders enter Help to Buy 2 in January, I expect this to continue although the rate of increase in London may moderate. People have rushed to take part in Help to Buy, but in 2014, I believe house price growth will be steadier.

In 2014, I believe the buy to let market will reach £25 billion. The Bank of England has already said it will not raise interest rates until unemployment drops to 7 per cent. So, many investors may want to look elsewhere for places other than deposit accounts to invest their money, and buy to let remains an attractive option.

Those considering buy to let might want to purchase a property soon, before prices climb even higher.       

2013 saw the housing market flourish; I expect this to continue in 2014.

By Rob Lankey, Managing Director of Commercial Mortgages at Aldermore Bank