2012 will be the year of the micro-market

In contrast, Hill believes that secondary locations such as the West Midlands and the north east, together with outer parts of the south east such as Ipswich, will see price falls in the region of up to 5-10%, as a result of poor demand and weak employment markets.

Planning permission approvals may increase in secondary areas, such as out of town sites where there is less local opposition, but the infrastructure investment required to make these sites viable is huge and many developers will not have the cash required. Successful planning applications may not, therefore, translate into the delivery of new homes.

Andy Hill, Chief Executive of Hill, comments, "I do not believe the NPPF is radical enough in its current form to have a serious impact on supply. The accusations of bias and the proposed changes to remove the presumption in favour of development, only further threaten its effectiveness in delivering homes. With planning permissions down 10% year on year, these changes to the NPPF represent a serious concern for the industry in 2012."

Lenders will continue to be risk averse this year as they shore up their capital positions. There is some evidence that the government-backed banks are lending slightly more, but it is unlikely there will be a significant further increase in 2012. The government has introduced new initiatives, such as FirstBuy, which are thought to be having some beneficial effects, but overall lenders will be reluctant to offer the high LTV mortgage products that the housing market relies on. This will result in zero growth in lending this year.

Investors are generally nervous and looking for capital protection. In strong locations they are showing a willingness to accept low rental yields, if they are confident that house prices will not fall. This trend looks set to continue this year but yields will be squeezed a little in prime areas, as rents plateau but prices continue to rise. However, outside these traditional investment hotspots, demand is weak. Investors will need to be less risk averse and take a punt on values or seek higher yields to compensate.

Andy Hill adds, "The market will be broadly flat in 2012, but it will be a very interesting year, with the true impact of the Eurozone crisis yet to play out, alongside major changes to planning policy. Local factors such as employment, infrastructure and family income will be vital to the health of each micro-market, contributing towards an inconsistent national picture."

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