Forecasts for 2008 property market
CLOUDS are gathering over the UK property market, according to the estate agent Savills, but the ensuing storm should be shortlived. The agent predicts a turbulent half-year ahead, with prime Central London property to suffer falls of 3 per cent and the rest of the country stagnating.
But the difficulties, caused by the credit squeeze and worries about bonus sizes, will be swiftly followed by a return to growth. Across the market, prices across the UK will be up 3 per cent by the end of the year, with London, the South East and Scotland outperforming.
The North, Yorkshire, Wales and the Midlands will underperform, according to the Savills weather map, pictured right.
This turbulence will affect the enthusiasm of both buyers and sellers and turnover will drop significantly. Some may be cheered by an interest-rate cut – Savills expects one next year, but says that, in the current economic environment, it will be 2010 before the base rate again drops to 5 per cent.
WHERE NEXT FOR PRICES?
Ian Springett, chief executive, Primelocation.com: “These are testing times for the prime London sales market. In just three months, we’ve witnessed a rapid transformation from constrained supply and intense demand fuelling vigorous price rises to buoyant property volumes and dwindling demand causing a decline in prices.”
Fionnuala Earley, economist, Nationwide: “Price growth will continue to cool for the rest of this year and into 2008. Slower economic growth, poor affordability, lower house-price growth expectations and the impact of the credit crunch are all negative factors. But supply and demographic issues work against these and we therefore expect house-price growth to be broadly flat next year.”
Gary Styles, strategy, risk and economics director, Hometrack: “Everyone is focusing on housing and the credit crunch, but elsewhere the economy is looking quite strong. The pressure for the Bank of England to cut interest rates has eased, but we are expecting two cuts next year, to reach a base rate of 5.25 per cent.”
Simon Rubinsohn, chief economist, the Royal Institution of Chartered Surveyors: “London will outperform next year, as there is still a lot of overseas money around. Prime Central London may not be where most of us live, but there is still going to be some ripple effect. Some cities in the North may suffer from the slowdown in public spending, but others, such as Manchester, should hold firm. We are not going to see a fire sale of buy-to-let properties, because most of these owners are in for the long term.”
Peter Williams, director, Intermediary Mortgages Lenders Association: “House-price inflation will, as always, be uneven across the country, so although we can expect properties in good locations to increase in value, there may be localised falls. Reports suggest this has already happened, even in favoured locations such as Winchester, though this is on the back of exceptional increases.”
Jennet Siebrits, head of residential research, CB Richard Ellis: “It will take some time for the slowdown in activity fully to feed through to house prices. During this transition period we are likely to see mixed messages.”