THE BLOG
24/02/2015 06:31 GMT | Updated 20/04/2015 06:59 BST

An Assessment of the Midlands Property Market

Rising interest rates could also affect house buyers across the East and West Midlands. If the Bank of England decides to increase discount rate from its record low of 0.5 per cent, the cost of borrowing will rise, but we are divided across the industry as to whether we will experience a rise in 2015, as it is possible for changes not to come into fruition until next year.

Prospective homeowners in the Midlands will have been pleasantly surprised by the latest Nationwide House Price Index figures, which revealed that property prices across the East and West Midlands fell by an average of 0.7 per cent in January, contributing to some of the slowest annual growth for the region in the last 12 months.

This pattern was synonymous with rates across the UK in early 2015, with annual house price growth in Britain continuing to ease, from 7.2 per cent in December 2014 to 6.8 per cent in January 2015. Despite being the fifth month in a row in which annual growth has slowed, house prices have still increased by 0.3 per cent month on month in January to the benefit of sellers. After taking account of seasonal factors, Nationwide found UK house prices to be currently 2.4 per cent above their pre-crisis peak, so we are definitely in a better position than we were.

It could be argued that the moderate rate of price growth is unsurprising, if not expected, given the housing market activity in recent months. It is also no surprise to hear reports of subdued levels of new buyer enquiries compared to the start of 2014 - in fact, The British Bankers' Association reported in January that mortgage approvals for house purchases fell in December for the fifth consecutive month to an 18-month low of 36,717, with a fourth successive drop in agreed sales as well.

Despite Britain experiencing slower growth of late, UK house prices still rose in January across the board. Interestingly, the East and West Midlands combined were two of just four regions to experience a monthly decrease in house prices. A notable example of this was Leicester, which experienced the most significant drop in house prices for a city across the Midlands, falling by nearly 1 per cent. However, I predict the region to recover once uncertainty around the general election cools. The average house price in the East Midlands is now £131,336, with properties in the West of the region slightly higher at £136,084 - still an annual price increase for sellers to celebrate.

All regions across the UK experienced a decrease in the number of repossession sales at the end of 2014 when compared to the same period a year earlier. Combined, the East and West Midlands experienced a total of 125 repossession sales, 64 per cent down on 2013 figures. This shows less houses are being repossessed and suggests more people are keeping up to date with their mortgage payments. It could also mean that banks in the Midlands are being more flexible with their payment terms and are more willing to lend.

So what do these figures mean for homeowners and prospective buyers across the Midlands in a broader sense? The latest figures show that the break neck pace of the housing market set in certain parts of the UK is starting to ease off, particularly across the Midlands, so if you take the current drop in house prices and add to this the record low mortgage rates currently available, it is increasingly looking like a great time to buy a property. It's very much a buyers' market at present, and those looking to purchase a property this year will welcome steady price increases in line with inflation, which will see the market in a far healthier state of affairs and secure a sustainable market over the long-term. On the other hand, from April those aged 55 or over will be able to take the whole of their pension pot as a cash lump sum, and it is highly likely that a lot of those who qualify will look to invest in residential property. This will present another great opportunity for sellers as those with extra cash cause the market to gather pace again. At the same time, those looking to buy this year would do well to do so before these changes come into effect in April to get the best possible deal.

2015 is going to be an interesting year for the property market and there are a number of factors which could significantly disrupt Midlands' house prices. Something the whole country is anticipating is the general election in May - this is sure to create uncertainty which could raise the cost of wholesale funding for lenders on the money markets, in turn increasing mortgage rates.

If you look in the dictionary for the definition of "general election", I would not be surprised if the description "a way to create a period of economic and personal uncertainty" jumps out. History has shown that in years where there is a general election the political rhetoric can have a bearing on the mind of homeowners and lead them down a road of decision and indecision. Some will make that move and others will want to move but prefer to wait. There are always winners and losers with this strategy, but the winners in 2015 are going to be the areas outside London.

The uncertainty around the outcome of the general election will have a bearing on the market but overall it will be a year of two halves. Whilst the first half of the year has always been the busiest period for the housing market it's likely that activity will flat line across the year, with less activity in the first half made up for in the second. Sellers who are also buying up the property ladder across the Midlands in the first six months of 2015 could well be winners in the second, so while now is a clever time to buy a property it could also be a canny move to sell up now and see the rewards later on.

Many buyers at the higher end of the market across the Midlands will be concerned about Labour's proposed mansion tax, which will apply to all homes worth more than £2m. This would come on top of the stamp duty changes implemented by George Osborne in December which significantly increased the tax for buyers of expensive properties, despite the majority of buyers benefitting from the changes. Anyone buying a property worth up to £937,500 will pay less tax.

Rising interest rates could also affect house buyers across the East and West Midlands. If the Bank of England decides to increase discount rate from its record low of 0.5 per cent, the cost of borrowing will rise, but we are divided across the industry as to whether we will experience a rise in 2015, as it is possible for changes not to come into fruition until next year.

Interestingly, the latest data from the housing market survey by the Royal Institution of Chartered Surveyors revealed new buyer enquiries in the West Midlands to be up by 16 per cent compared to the average total over the last three months, with the East Midlands experiencing a 15 per cent rise, despite still recording a negative reading in January. However, the contraction in demand appears minimal and the overall reading continues to mask a very mixed picture across different parts of the UK.