Savills has released its forecasts for both the prime and mainstream UK housing markets for the period 2010 to 2015.
“In announcing our 2009 forecasts we stated that the prime central London markets would lead the recovery and that the bottoming out of these markets would be the ‘key indicator that the worst is over for the entire residential sector’. We are now past that point meaning that we can forecast five year price growth with some certainty even if it is more difficult to forecast the short term impacts of supply and demand on values over the next twenty four months.” Yolande Barnes, head of residential research, Savills.
“The price growth of 2009 has taken most market commentators by surprise and few, if any, expected demand from equity rich buyers to return so strongly and so quickly, particularly in the mainstream. It is the imbalance between low supply and high cash-driven demand that has driven prices upwards. In mainstream markets, therefore, conditions are currently far from normal.”
Correspondingly, over the course of 2010 prices are expected to soften as pent up demand from cash-rich buyers will begin to be satisfied and stock shortages will ease. This could result in a brief period of headline-grabbing price falls – up to -6.6% – around the mid year point, with modest growth (+2.7%) in 2011. However, the longer term prognosis is for a return to price growth in mainstream markets, with the average UK house price values expected to rise by 27% over the period 2012 to 2015. This would leave the average UK house price just under £200,000, over 7.5% higher than at the peak of the market towards the end of 2007.
The prime markets, broadly the top 5% to 10% of property, are less mortgage reliant. Owners have a greater equity cushion and as a result these markets are less susceptible to the drag of a slow economic recovery. Therefore, whilst a small fall in values of 1.0% is forecast next year, this is expected to be followed by a much earlier return to sustained price growth.
Frank Townsend, director of Savills Hampstead office commented: “Eighty per cent of the sales that Savills Hampstead conducted in 2009 were to cash buyers. The lack of mortgage funding underpins why such a high percentage of the deals that we have done in North West London have been this way, but where funding has been needed, Savills brokerage arm, SPF have still been able to place funding when required.”
He also points out that getting the guide price right has resulted in a similar percentage of sales producing competing buyers. “It hasn’t pushed up prices significantly, but from early May, prices stopped falling and deals have been going through very quickly. On the price side, I suspect that we are 6 or 7 per cent higher than we were then.”
Prime central London price growth is expected to total around 18% and 35% over the next 3 years and 5 years respectively, with equivalent figures of 14% and 30% in the prime regional and country house markets. The Savills forecast for both the prime central London and prime regional markets is for a correction of no more than -1.0% in 2010.