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From The Times

November 9, 2007

Forecasts for 2008 property market

Prices will fall early next year - but homeowners can expect quick relief

Judith Heywood

Click here to see the property market forecasts for 2008 region by region

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.”

There are so many vested interests out there that you would well not to listen to the advice of anyone claiming to be a housing market expert. Instead read the financial pages (NOT the property pages!), watch how long houses in your area stick on Rightmove - and how much they really go for when they sell - and draw your own conclusions.
You will see that there are already many BTL properties being offloaded, that yields on new-build property are negligible, and that - at least where I live - recent-build flats have already been falling for a year or two.
"Go figure", as our American friends like to say.

Anthony Charlton, Swindon,

It has been more difficult to sell houses for approx. 1 year. The reason - high interest rates. Now rates are falling, watch out for life coming back into the market AND rising prices in good areas. Simple mathematics !! Sub-prime lending has been going on in the UK for approx. 10 years (my niece sold lots of those mortgages!). The USA problem has affected us ONLY because of our lenders' greed and stupidity in taking on those foreign risks.

John Fisher, Edinburgh, Scotland

The comments in this article are from respected professionals who spend 24/7 studying real estate ... so

Demographics and economics in a popular but small, heavily populated island, combined with the fact that a roof is a necessity of life ....

Will portend a "blip" for the short term but ..... a healthy rise after that.

lyn, santa barbara, ca, usa

Ewan of Sherbourne, Dorset. FYI: The CEO of Goldman Sachs and some analysts DID predict the housing crash! Today they rake in all those lovely bets! Good luck to them.

pat, FL, USA/ExPat,

Agree with Mark about the doom-mongers: In my experience those who advise "the market's going to crash" don't actually own a house, and those who say "hang in there" do own a house.

People can come from having nothing and find a way to save for a house and build wealth/an inheritance - those who heckle from the sidelines are just bitter at themselves for not looking for the way.

charlie, losangeles/london, usa

I take it you own a home then Mark?

Michael, Belfast,

The USA crash was predicted by many - the combination of low interests and easy credit is a dangerous mix that has led to crashes before, and exactly what the UK has experience for a decade.

High property prices benefit no one except speculators and punish those who most need to get on the housing ladder - younger people with families etc.

Ignore what the "experts" say, they are always wrong. I have seen these for years and they always predict the trend growth figure (inflation plus a bit more) when in fact house price inflation hit 20+%. They will be just as wrong when house prices start falling.

Henry, London,

Ewan, MANY people in the USA predicted the crash ! ... They just couldn't agree on the exact starting date !

And, Mark, I agree with you, re. the 'miserablists' ... all sitting on the edge of their seats, waiting to be the first to say, "I told you so !"

The people with the most to lose, are those who over-extended in order to buy and those who helped them do so.
These kinds of borrowers and lenders should know, before going into their deals that what they are doing is taking a gamble. .... Fair play, to those who lucked out, and 'hard luck' to those who lost. ......

How hard is it to take a look at the 'worst case scenario' before comitting yourself to a loan on a house ? The property market , anywhere, is just a 'bandwagon' ... when the road gets bumpy, some people fall off !

Suze, Orange,

Why does nearly every comment on these property blogs seem to be tinged with a barely concealed bitterness, and a heart-felt longing to see a crash?

Yes, the outlook seems uncertain; however, reasonable economic growth, lower interest rates, and in many areas demand continuing to outstrip demand all would indicate at least stability or modest growth.

The doom-mogers, who have either just sold, and want their decision justified; or are struggling to get in the market, and are hoping against hope that some 'miracle' will improve affordability, are ignoring the fact that the vast majority of people in this country are driven to own their own property. That won't change.

Also I find it curious that the whilst the qualifications of anyone with a positive outlook are questioned, the miserablists, most of them presumably no more qualified, feel happy to pronouce the end is nigh.

Mark, London,

Does this mean that an off-plan flat in - oh, I don't know, say, Dalston, might go down in value?

Harol Lloyd, Bradford,

I'm sure if 'these guys' had a spare few ten grand for deposits they'd love to make the necessary bets, just as much as they'd wished they'd predicted the crash in The USA which no-one in The USA predicted. Maybe we need a Government regulation stating all estate agents should be psychic?

ewan, sherborne, dorset

Strange, isn't it that the best economic brains in the world can't accurately forecast future trends, yet estate agents purport to know exactly what will happen. Last time I looked, absolutely no qualifications were needed to be an estate agent so excuse me if I politely say that they don't know what they are talking about. I don't know who is most stupid - the Times for printing this sloppily researched rubbish or me for bothering to read it.

Clint, Staffordshire, UK

"3% but shortlived"

The science behind this prediction must be more complex than quantum physics. I'm SO glad we have Savills educated and un-biased opinion to rely on.

Paddles, London,

Just looking at the trend can show what's going to happen to houseprices. There's no 'mixed messages' or 'stagnation'. We've reached the peak and are on the way down. Why house prices are to be miraculously supported next year while the same economic conditions exist today and prices are falling, is anyone's guess?

David, London,

"Watch out for a property price collapse."

There is no such thing likely to happen.

What needs to happen is property price normalisation, before it went mad 5-10 years ago.

Whether that's likely or not, and on this point I agree, no one really knows and estate agents, if they did, always talk profit-motivated propaganda.

Joe, Manchester,

This is extremely bearish given that these are all the traditional property optimists (estate agents, mortgage brokers etc) who would rather eat there own grandmothers than predict a sustained period of "negative house price growth". The market has survived on blind faith, greed and fear, but if people can no longer get (insane) mortgages, then the "ladder" starts to look very shaky indeed.

Nick Wainwright, Cambridge,

these guys make money in this market. Why should anyone believe to what they say?

rik, brussels, belgium

WoW ! If these guys know so much about how the market will perform, they should just make the necessary bets and retire. Which among them predicted the subprime crisis? The subprime crisis has decimated demand. Watch out for a property price collapse.

Kara Swart, London, UK