Mark Montgomery, Commercial Director, 1st Property Lawyers, comments: “The outlook for 2012 is similar to what we have seen in 2011. Perhaps against the odds, the property market looks set to stand its ground, experiencing slight fluctuations in prices and transaction levels, but remaining largely flat. Following on from the lower offers being accepted in Q4 2011, property prices outside of London may continue to soften in Q1 2012, falling back by 5%, before increasing modestly, resulting in an overall reduction of 1% across the UK by the end of the year.
“In terms of prices, there is no one UK housing market but multiple regional and local markets with very different drivers. The capital will continue to outperform the other regions and attract international buyers looking to invest their money outside of the troubled Eurozone and the perennially popular Home Counties commuter towns will also see demand boost prices. These hotspots will help balance out more substantial house price falls elsewhere.
“Transaction levels are also set to remain relatively flat, possibly seeing a modest reduction in volumes of around 5%, affected by fragile consumer confidence following the Eurozone crisis and its aftermath, which have the potential to further constrain UK mortgage lending. First time buyer levels look set to stay stable, however. Lower house prices and Government schemes such as FirstBuy and the new mortgage indemnity scheme for new build properties will increase volumes at the margins; a more significant and much needed boost for this group will only materialise on the back of a substantial improvement in the availability of affordable mortgages, particularly as the stamp duty holiday comes to an end in March 2012.
“Lingering job uncertainty, particularly in the public sector, may cause people to change their mind about a move, leading to an increase in aborted sales. However, in a market with relatively stable prices and volumes, there is no reason why those buyers who do have their finances in order shouldn’t progress through their sale without trouble. In fact, the difficult climate may have the effect of discouraging anyone who is not fully committed to moving.
“Growth in the buy to let market will also help underpin house prices in 2012, but high and rising rent levels across much of the country will mean that, for those who can raise the necessary deposit and secure a mortgage, home ownership will still make sound financial sense.”
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