The UK's National Housing Federation (NHF) has suggested that the insufficient supply of new houses in the UK will mean home ownership will start to approach the low levels seen the 1980's towards the end of this decade. The NHF also predicts that house prices will increase significantly as a result of this shortage of new homes being built.
Another knock-on effect will be that private rental prices will become even higher than they already are, and exacerbate the problem where those renting are paying considerably more than they would for a mortgage on a similar property but cannot raise the high deposits now demanded by high street banks and other lenders in order to obtain a good mortgage deal. This could have the effect of increasing the already long waiting lists for social housing and potentially create another property boom.
The NHF statistics forecast that the national average property price in the UK could be pushed up to £260,404 by 2016 with London and the South-East typically predicted to see an equivalent but, obviously, larger increase in the average house price.
This is good news if you already own a home but just more bad news for those who don't as it makes the chance of property ownership even more difficult for first-time buyers and, of course, first time buyers should be the life-blood of the property market. To add to this bad news for renters it is expected that rents will rise by nearly 20 per cent over the next few years; way above the level of inflation and expected salary rises in that time.
This situation is likely to create investment opportunities for those who have owned a home for some years and have built up a significant amount of equity in their property. In certain areas such as London and the Home Counties and other major UK cities it may be seen as sensible to try to retain an existing home when moving on to buy a new, whether that is through changing jobs so moving to a more convenient location or simply trading up to a larger or better property to accommodate a growing family.
This has the added bonus of relieving the pressure to tie up a sale and purchase in one transaction in a property market that, with the exception of prime London property, is rather stagnant. Where a move has to happen relatively quickly, for instance because of a job change or relocation to a different area, or because children are changing schools retaining the old property offers a simple and stress-free solution: retain and rent out the old property and move to a short-term rental property in the new area. This makes you a more attractive buyer as you will be chain free and being in a chain can often be a deal breaker for sellers in the current market.
Of course, being able to do this all relies on being able to secure a buy-to-let mortgage, which will depend on whether you are seeking a large mortgage for your new property. If the National Housing Federation's forecasts are realised then investments in property could be a better bet than any other investments over the next 5 year period.