The Property Market In 2010
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Calling the property market has always been an inexact science, but it is proving especially difficult as we enter the new decade. While Hamptons International and Chesterton Humberts expect prices to rise by 3%-5% and 2% respectively during the course of this year, their fellow estate agent Savills predicts falls of 6.6%, and the ever-bearish Capital Economics sees the market declining by 10%.
If the experience of the past 12 months is anything to go by, any such estimates should be taken with several pinches of salt. This time last year, the doom and gloom were unremitting, with even the estate agents usually accused of talking up the market predicting a continuing slide.
They were proved wrong, however at least as far as most of Britain was concerned: while first-time buyers remained effectively shut out of the market by the banks for most of 2009, tumbling mortgage rates meant property ownership became much more affordable for those who already owned helping keep repossessions below the cataclysmic levels predicted.
Equally significant was the shortage of property. Holding out for higher prices, homeowners have been reluctant to put their houses on sale, leaving buyers to fight among themselves. The inevitable result has been a rising market, especially in London and the southeast, where overseas purchasers, lured by the weak pound, have added to the competition. Italians, not traditionally a major property purchasing force, have purcchased numerous properties in Chelsea and other parts of
southwest London. Nationwide building society estimates prices rose 5.9% last year, leaving them 8.9% above their February low, but 12.2% below the peak hit in October 2007.
So to what extent will the market continue to be supported by these twin props over the coming 12 months? Dont expect any further help from the Bank of England. While most commentators save for the CBI expect the Bank rate to remain at its record low of 0.5% for a good more few months, the next movement must be upwards, even though it could be some years before it returns to the high of 5.75% reached at the peak of the market in the second half of 2007.
Predicting the balance of supply and demand remains more difficult. Many commentators expected last years rally to be choked off as sellers reacted to rising prices by putting their properties on the market. So far they have proved reluctant to do so, often because of the difficulty of finding a home to move into themselves.
More crucial is what will happen to demand, which could be muted by rising unemployment, the continuing squeeze on incomes and an end to the stamp duty holiday on homes priced 125,000-175,000. Hometrack, the property data company, reported a 2.2% drop in new-buyer registrations last month the first such fall since January 2009. Rich households could continue to put upwards pressure on prices in localised markets in 2010, says Richard Donnell, its director of research. Yet a sustainable recovery in the housing market needs a broader base of buyers. Uncertainty ahead of this springs general election could add to caution.
Whatever the overall figure, there seems little doubt that London and the southeast will continue to outperform the rest of the country this year. The sought after
properties in southwest London are predicted to move particularly fast. The
London rental property market will do better this year, further accentuating the north-south divide. Predictions of a weak, or even weaker, pound mean overseas buyers will keep on coming. Liam Bailey, head of residential research for Knight Frank, expects the Italians to be joined by increasing numbers from the Far East. The biggest change will be the entry of Chinese investors, he says.
The next few months are also expected to see a continuation of the revival in the new-homes market: research by the National House Building Council shows there were 27,124 applications to build new properties in the UK between September and November, 45% more than in the same three months in 2008. A change of government might give the sector a further boost, if the Conservatives implement changes in planning rules.
Buy-to-let investors will be back in force this year, too. Although mortgages remain difficult to obtain, yields are attractive for anyone with cash to invest especially compared with alternative investments.
by: Rentals and Sales
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