“National house price data indicates a flat to positive position in the final months of 2012, with a sense of stability and optimism in the housing market. The Funding For Lending Scheme is certainly encouraging greater competition and increased lending, and the results of this should feature in activity levels and prices in Q1 and Q2 this year. The spectre of “locked-up” mortgage lending driving the market down into a crash is therefore fading, although deposit requirements will remain high for the time being as the banks continue to focus on risk rather than margin.
“However, long-term undersupply of housing remains a real problem, particularly with regard to rental accomodation. The demand for private rented sector accomodation has expanded by over 1 million households in the last five years, and it is the lack of affordable properties and high quality landlords in this sector that is causing the perception of a housing system in crisis, not general house price inflation.
With the peak of owner occupancy having been reached in the cheap credit boom, it is now vital that investment flows into the right type, location and tenure of property. Institutional investors and property funds are already in the market seeking long-term, inflation beating returns from UK rental properties, and encouraging this flow of capital into the sector will provide a sustainable and real answer to the housing problem – and good investment returns to boot.”