UK base rate remains at 0.5%

London property prices see +20% growth in 12 months

Confidence is high amongst homeowners

More landlords want property management

Credit availability to increase for the property markets

Activity in the construction industry picks up

The UK base rate has again been kept at 0.5% by the Bank of England (BoE) for the 13th consecutive month.

Also the Quantitative Easing (QE) programme has been left unchanged at £200bn, however the BoE may extend QE in the future if the economic recovery loses steam in early 2010, after it started to improve in the final quarter of 2009.

James Thomas, head of residential development and investment at Jones Lang LaSalle, said: “The residential market saw positive news this month, with Nationwide reporting house prices rising by +0.7% across the UK in March.

“All eyes are now towards the Election and the outlook for fiscal planning. The backdrop of the underlying economic conditions, in conjunction with a predicted rise in unemployment, is likely to dampen price growth and the concern of rising interest rates later in the year will continue to weigh on the market which has performed well recently largely due to a limited supply of property for sale.”

London property prices see +20% growth in 12 months

London’s residential property prices have risen +20% in the 12 months to the end of March 2010, according to Knight Frank, meaning they are growing at the fastest rate since March 2008 and are now only -9% below their peak.

Liam Bailey, head of residential research at Knight Frank, said: “The rapid growth in London’s pricing reflects not only the stimulus given to the market from low interest rates and the weak pound - which have driven domestic and international demand - but also to very thin supply over the year, set against very healthy interest from buyers.

“The balance between purchasers and vendors has become more even in recent months. In the final quarter of 2009, our local offices recorded ten new buyer registrations for every new sales instruction - well above the long run trend of 5.5. By March this ratio had dropped back to seven as more vendors began to bring properties forward for sale on the back of rising prices, and also as buyers began to delay activity in the run up to the budget and the election.”

The growth in prices has been led by the lower section of the market, in particular the sub-£2.5m sector which has prices increase by +23%. The higher end price brackets (£5m+ sector) have seen a +17% increase.

Bailey said: “This growth has not been evenly spread, and it has been the low to mid end of the market which has seen the strongest growth. The more expensive price brackets have lagged, reflecting the fact that the recovery in pricing started later in this part of the market.”

Confidence is high amongst homeowners

Residential property prices have been predicted to rise by an average of +5.7% by October 2010, according to a survey conducted by Zoopla.

It found in the survey that 81% of homeowners believe that property prices will continue to increase in the next six months, which is a +51% rise in expectations inside 12 months. However 9% stated that they expect prices to decrease, whilst 10% expect them to stay where they are and remain relatively flat.

Nicholas Leeming, commercial director of Zoopla, said: “With the bad weather behind us and the recent stamp duty relief introduced for first-time buyers, confidence in the property market has bounced back well. Despite the optimism, significant concerns remain around the supply of mortgages and whilst affordability levels are now higher than at any time in the past few years the lack of mortgage funding, especially for first-time buyers, remains the single biggest threat to a full housing market recovery.”

However, according to 78% of people surveyed, mortgage finance was easier to obtain in March 2010 than it was three months previously.

Zoopla has noted that there is a historically high correlation between the confidence level shown in the survey and market activity approximately three months later. This is particularly indicative as 23% stated that they are waiting to see the outcome of the general election before making any property-related decisions.

The Scots are the most optimistic on the prospects of their local property market as 86% expect house prices in their area to rise in the next six months, this compares to 80% in England and 76% in Wales. The Northern Irish are somewhat less optimistic as only 62% predict house prices will increase in the next six months.

More landlords want property management

Letting agents have seen an increase in demand over the last 18 months from landlords wanting to have their properties managed, according to Townends Estate Agents, part of the Badger Holdings Group.

It appears that landlords are seeking to use a professional agent as they believe that they have a better grasp and understanding of compulsory legislations such as Energy Performance Certificates (EPCs), Tenancy Deposit Schemes and Houses of Multiple Occupancy.

Caroline Kavanagh, group lettings director for Badger Holdings, said: “The last 18 months has seen a significant rise in the number of landlords opting for a managed service. Property management involves the processes, systems and manpower required to manage the life cycle of a tenancy, which many landlords, having experienced the process themselves, now realise the benefit of having a managed service.”

Tenants apparently are also more interested in renting a managed property as they wish to benefit from full security on maintenance issues and the knowledge that their deposit is secure and has been handled in line with legislation, this combined with the peace of mind that a professional agent is on hand to assist with any needs whilst they are renting.

Credit availability to increase for the property markets

Capital Economics believes that the latest Bank of England’s (BoE) credit condition survey suggests that credit availability for the housing and commercial property sectors is likely to continue to rise, albeit at a modest rate.

Residential mortgage default rates fell for the third consecutive quarter in Q1 2010 although lenders had predicted an increase in the previous survey. Defaults are also not expected to rise significantly in Q2.

Although mortgage availability is expected to increase and loan-to-values (LTVs) ratios are likely to rise in the next three months, lenders believe that the recovery is not secure and that house prices may fall from their current levels.

Kelvin Davidson, property economist at Capital Economics, said: “ The survey suggests that mortgage approvals could recover slightly in the near-term, though the rise is unlikely to be dramatic and remains very dependent on the economy not suffering a lurch back into recession.”

The commercial sector also is seeing some stability in default rates although lenders have indicated that there is some risk as borrowers covenants could weaken further. On a positive note lenders reported a rise in credit availability during Q1 2010 and an increase in Q2.

Davidson said: “Although the history of this survey is fairly short, lenders’ expectations for any change in commercial property credit availability have tended to have been too optimistic in the past.”

Activity in the construction industry picks up

Activity in the construction industry has expanded for the first time in over two years since February 2008, according to the Chartered Institute of Purchasing and Supply (CIPS).

The CIPS conducted its monthly survey of contractors and construction purchasers and recorded an improvement of almost five points as it went above 50, which indicates a growth in activity, for the first time since February 2008, as it hit 53.1.

David Noble, chief executive officer at the CIPS, said: “Though it’s great to see the UK construction sector turn the corner after two years of relentless contraction, it’s still very early days. The recession hit construction the hardest, and this upturn may be short-lived. It’s worrying to see civil engineering contracting, given that mooted public sector spending cuts are yet to kick in.”

Commercial activity grew as well, for the first time since February 2008, though work in civil engineering continued to decline.

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