According to the Centre for Economics and Business Research (CEBR) the property market is about to bottom out at 25% less than its 2007 peak and we will see ‘modest’ price increases next year. It says that prices could fall by a further 3% to 5% but a ‘chronic undersupply’ of housing and a predicted pick up of mortgage lending in 2010 will stop the market falling any further. Following on from this the Centre predict that prices will rise by 2% next year and by a further 3.5% in 2011.
Defending the prediction that house prices are near the bottom of the trough, Benjamin Williamson, one of the authors of the Consumer and Housing Prospects report, said: “In the UK, the concentration of people on this tiny island and the shortage of supply of houses have created a house price floor, which house prices won’t go below. We have always maintained that a shortage of housing supply in the UK will maintain a floor for prices.” Wise words, but if suggestions in certain quarters of the cash-rich pool of buyers drying up and the number of properties coming to market increasing, then the market could well fall some more.
In terms of mortgage approvals, the CEBR has forecast that they will increase from lows of 42,000 in 2008 and 43,000 this year to a possible 55,000 next year. That doesn’t seem like a particularly big increase but the CEBR say that is enough to support modest price increases. Despite this generally optimistic outlook, it also predicts that, based on the Halifax index, prices will not regain their £196,000 peak until around 2015.
Just how reliable these predictions may be is questionable of course. The same group had previously predicted that prices would stop falling in the middle of 2009 and go up by 30% by 2012. This forecast came in August 2008, before the banking crisis escalated and highlights the dangers of trying to second guess such a volatile market. Other groups offering a glimpse of future house prices include the National Housing Federation, which represents housing associations. It says that the market will fall by 4.6% in 2010 and then rise by 20% by 2014. The Royal Institute of Chartered Surveyors (RICS) have also recently weighed into the debate by stating that they think house prices will show a modest rise this year.
The Council of Mortgage Lenders has also just released its figures for June and these show a rise of 23% in new loans for home buyers. This can be seen as further indication of the property slump bottoming out but the number of new loans is still half of the average monthly total for June registered in the last seven years. Further evidence that the market is being propped up by the lack of property for sale comes from RICS; only 2% more surveyors saw a rise rather than a fall in the number of homes on their books in July. RICS spokesman, Jeremy Leaf, said: “Although demand for property is continuing to rebound, it still remains low from an historical perspective. Crucially, it is the lack of supply that is helping to underpin prices at the present time.”