Play it safe and invest in the best locations, say Savills
A SHIFT in buying power from younger, debt-driven purchasers to those with equity, will lead to several lasting changes to the Yorkshire housing market, according to Marcus Dixon, an associate director at Savills.
Speaking at a property seminar in Leeds, hosted by Savills this week, Mr Dixon also advised that anyone looking to invest over the next five years should buy in well-established and popular areas.
York, Harrogate and Ripon together with the ever popular villages in the Howardian Hills and the sought-after suburbs such as Scarcroft, in Leeds, offer excellent potential.
“Savills is finding that despite continually low transaction levels, most buyers in the market today are equity rich, cash buyers with no need for mortgage finance.
“It seems common sense but the areas that will bounce back first are those where prices and transactions have remained the most stable in the last few years,” he says.
So who holds the property purse strings?
According to Savills, 83 per cent of equity is held by home owners over 45, with more than 40 per cent of these homeowners over 65.
Lack of finance for others who need a larger mortgage is still the biggest factor affecting house prices.
“Low equity markets, where buyers rely on mortgages to purchase their properties, are struggling to recover, whereas higher equity markets, such as those in Harrogate, York and the well-established villages in North Yorkshire, remain buoyant,” says Mr Dixon.
“However, there are massive disparities between different areas within the country and within the Yorkshire region. For example, North Yorkshire remains one of the places where the prime market is still relatively active when compared to level of sales and values before 2007.
“The lesson is that those wanting to make money from a housing investment over the next five years should look to buy the best possible property in one of the best areas they can afford.
“That way, the area should recover fastest and you can realise your investment more quickly than you would if you bought in an area that may take longer to pull through.
“Prices in areas where a lack of mortgage finance combines with low levels of demand will still take longer to bounce back.”
Savills’ price forecasts predict it will be a few years before things start to recover.
“Overall, UK house prices are starting to come through the much mooted second slip. Figures are still in negative growth but prices are continuing to improve,” says Mr Dixon.
“Currently, we’re predicting that across the Yorkshire & Humber region the housing market will grow by 1.7 per cent between this year and 2015, although most of that growth will happen in 2014 and 2015.
“Slow economic recovery, abnormally low interest rates and low transaction levels will continue to drive geographical differences in house price recovery.
“There will also be a marked difference between the type and grade of property which will also change the shape of the market.”
Savills say there will be a huge increase in private renting in the lower tiers of the housing market, with one in five UK homes being rented by 2016.
They believe that a shortage in supply of these homes will lead to rental income growth, which, in turn, should attract cash-rich investors and institutions into that market.
Meanwhile, a report by CBRE Richard Ellis identifies Harrogate, Skipton and Richmond areas of Yorkshire as development hotspots.
These are among just a handful of areas with a low level of housebuilding, high price growth and good employment prospects outside London and the SouthEast that are seen as a good bet for developers.