The scheme which was launched a couple of months ago is set to have a big impact on mortgage rates and availability and the residential property market is hoping it will help more first time buyers onto the property ladder and therefore boost the real estate sector overall.
Buy to let specialist Assetz is predicting a 5% growth in house prices as a result and it says its prediction a year ago of 3% growth is on target.
The Assetz analysts also expect that interest from international buyers that has helped property prices in London to soar, will continue in 2013 but move out beyond the capital city and help surrounding markets.
It is also predicting a 4% increase in residential rents across the country and strong growth in the buy to let sector.
‘The housing market is on track to end this year with growth of around 3%, in line with our 2012 prediction, according to Assetz House Price Watch, a summary of the leading UK house price indices. Prices overall have been buoyed by a strong performance in key locations, particularly London and upmarket commuter hotspots in the South East, while many parts of the country have seen no growth or marginal price falls,’ said chief executive Stuart Law.
‘We are just starting to see the impact of the Funding for Lending Scheme, which is bringing liquidity to the money markets and is already bringing about a reduction in mortgage rates for lower loan to value borrowers. The competition we are now seeing among lenders for business at 60% loan to value (LTV) is an excellent sign, as over the coming months this competition is likely to creep up to 65% and 70%, bringing better deals to homebuyers and boosting lending levels,’ he explained.
He said that as transaction levels remain very modest, a real improvement in lending could open the floodgates to buyers who suddenly find themselves in a position to move. ‘This would have a considerable impact from such a low base, particularly in popular residential areas where there is good infrastructure and a sound employment market. Areas that are reliant on manufacturing or the public sector, which are struggling with higher levels of unemployment, will see very low transaction levels next year and price falls,’ said Law.
‘House builders are targeting better quality and larger properties around the country and are beginning to expand again. While house building starts remain low at around half the peak levels of activity we expect a slight pickup in building in 2013 but this minimal growth in supply will have no measurable effect upon rising rents and the strengthening prices of quality property,’ he pointed out.
He believes that high levels of activity in the buy to let sector will continue to underpin the market next year. ‘In recent months, international money has been seeking alternatives to the now inflated London market, which is likely to see price and rent corrections in 2013. Strong regional cities such as Manchester and Liverpool are appealing to foreign investors who are drawn by high local rental demand and yields in the region of 8%, which are hard to come by in the south east,’ said Law.
‘The rental market is in an excellent position, with tenant demand extremely strong and rents expected to rise 4% across the UK next year. Buy to let investors are pouring into the sector, seeking a home for their cash which will offer a secure monthly income as well as an asset which is likely to grow over the long term, funded by cheap borrowing,’ he explained.
‘Our research, carried out in September 2012, shows that three quarters of buy to let investors intend to expand their portfolios next year. We now have 55,000 registered cash rich investors on our books and expect to end 2013 at 75,000 active registered buyers,’ he added.