Investment special: Gaining from a housing recovery

The long period of dormancy for Britain’s housing market looks as if it is coming to an end — though there are huge regional differences.

Central London remains exceptional, with the influx of overseas buyers into Kensington, Chelsea and adjoining neighbourhoods creating a microclimate of surging prices that has little to do with economic fundamentals — and has the political left salivating at the thought of a ‘mansion tax’ on properties worth £2 million-plus, even if that means turfing elderly widows out of family homes.

Some five years on from the financial crisis that brought many lenders and house-builders to their knees, there are signs of a broadly based recovery. The improvement has already led to a sharp rise in builders’ shares and encouraged one of the victims of the financial crisis, Crest Nicholson, to return to the stock market in mid-February. Its shares immediately rose from an issue price of 220 pence to a handsome premium at around 265 pence.

Most popular

Ross Clark

Could China collapse the US economy?

A return to health for Britain’s housing market will be a key element in any wider recovery. Broadly the data has been improving for some time. Mortgage approvals, the most reliable forward indicator of the housing market, climbed to 55,800 in December, their best level for nearly a year. Similarly, new buyer inquiries, as measured by the Royal Institution of Chartered Surveyors, have been increasing sharply. Estate agents report record numbers of house hunters in January.

A key factor behind the more upbeat market picture has been the Bank of England’s £80 billion Funding for Lending scheme, which has been more successful in bringing down the cost of mortgages than in stimulating loans for small and medium-sized enterprises. The cost of fixed-rate mortgages has dropped to its lowest level since the autumn of 2011, although the cost of variable-rate home loans has crept up slightly.