No sign of feared housing market double dip

Chief Executive Stuart Law said: "2009 is already well on its way to ending the year with positive annual growth of around 5%, as we forecast to much derision early this year.

"The next 12 months are likely to bring modest further growth in house prices and the UK could well end next year with an overall 5% increase. Whilst the level of house price growth will slow from the current rate of 12% per annum seen over the last six months to be more moderate, there is little evidence that the double dip, a fall to new lows, predicted by many commentators will come to fruition in 2010.

"There is an expectation that recent house price strength will bring a flood of sellers return to the market, but any increase is likely to be steady and still outweighed by the larger number of buyers now looking to make their move.

"The current undersupply of property is likely to worsen, as housebuilders struggle to deliver any substantial increase in new properties in 2010. Developers are only going to be building around 100,000 units next year whereas at the peak this was around 180,000 units a year, versus a 240,000 Government target. When coupled with the existing undersupply, this shortfall will provide a major upward pressure on house prices in 2010. In trying to address this lack of supply, housebuilders will return to selling off-plan to enable them to obtain better development funding, a trend we have already seen starting again in Central London this year."

In terms of interest rates and the prospects for further lending, Law said: "Base rates will eventually start to rise, probably in the second half of 2010, and will likely rise to between 1% and 2% by the end of the year. There is a possibility that we could end 2010 with a 3% base rate if the economy begins to rebound strongly but at the moment we cannot see any leading indicators suggesting this.

"Mounting Government pressure on lenders to reduce margins and increase lending will be one of the catalysts for maintaining affordability for new property buyers. This will keep payable mortgage rates suppressed even whilst the base rate is rising. I expect lenders to move to offer more attractive products to borrowers within three months of all of the major house price indices moving into positive annual growth, which probably means improving lending terms in the first quarter of next year."

And there will still be money to be made from the rental market.

Law said: "There are likely to be some winners in the rental market next year, especially in city centres which may be a surprise to some who still believe the ‘over-supplied city centres’ myth. There is substantial undersupply of quality accommodation in the key city centres such as Manchester and Birmingham and this could well drive rental prices up by around 10% next year as any remaining stock is soaked up. These rent increases, which we expect to continue in the face of limited supply, will help insulate landlords from the forecast rises in interest rates over the coming years."

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0 thoughts on “No sign of feared housing market double dip

  1. simon wilkinson

    I very much agree with the views expressed, but would add that regional variations and variations in house type are leading to a new phenomena of house price segmentation. IE. A Traditional 3 bed semi, in a good part of a town is going up in price very fast due to strong demand. But A modern 1 bedroom flat, in a market where far too many have been built in the last 7 years is still very depressed in price terms due to very weak demand. Across the Central South Midlands, many properties are already close to where they were at the peak of the Market in Spring 2007 in price terms. Many prospective vendors have put off an aspirational house move as they cannot now get the multiples of income they require to match their existing mortgage, despite the fact they can afford the repayments, this means that supply of new instructions will be constrained for some time yet.