UK mortgage applications up 20% in 12 months

The Bank of England has this week confirmed that UK mortgage applications were up by a staggering 20% during 2013 compared to 2012. Just under 735,000 mortgages were approved in 2013 against 612,000 in 2012 which certainly indicates a growing confidence in the UK property market. These figures have prompted some fears that the UK property market is headed for a price bubble but if you take a look around the country, the performance of regional property markets is varied to say the least.

The UK government has played a major role in the ongoing increase in mortgage applications with the Help to Buy scheme as well as cheap finance programs for the UK financial community. So what can we expect in the short to medium term? Is the UK property market really heading for a crash?

Lack of suitable property

Time and time again we see many experts suggesting that a lack of suitable property is impacting the UK property market. While many people who were previously locked in by negative equity will be moving into positive territory, there are signs that the UK economy is turning and not an awful lot of people are looking to move house. As a consequence, this lack of suitable property stock means there are fewer properties to buy and a growing number of potential buyers. Hence, as you might expect, we see a squeeze in prices.

Quote from PropertyForum.com : “Property prices in the UK increased by an average of 1% between 9 December 2013 and 11 January 2014. The festive period is traditionally a time for reflection in the UK real estate market with prices falling over the last 10 years by an average of 0.2% at the turn of the year.”

There is a growing opinion that as the UK property market moves higher we will see more suitable properties come to the market. Whether this is individuals looking to downsize, perhaps cash in on the property boom or investors looking to take a profit, this expected growth in property stock for sale will slow down further property price rises.

Is the government playing a dangerous game?

In some ways the UK government is leaving itself open to accusations of manipulation as we move towards the 2015 general election. There would be nothing better for a UK government seeking re-election, than to see the property market booming, the economy turning and the feelgood factor returning to the general public. The Help to Buy scheme is controversial, in tandem with an array of other financial incentives offered by the UK government but it is helping many people finally get a foot on the property ladder. It is also expected to last for some time yet and may even overlap the next general election thereby offering a backbone to the UK property market in the short-term.

Whether we will see a reduction in UK house prices after the next general election, after financial incentives have been removed and reality kicks in, remains to be seen. At this moment in time the UK property market is attracting significant domestic and overseas investment and when compared to the rest of Europe, it is perhaps not difficult to see why. It will be interesting to see how the market performs over the next two years, whether the ongoing recovery goes above and beyond the next general election or whether the recent hype surrounding the UK property market begins to fade.