Stock surge a cause for optimism despite price slip

In the current climate, activity levels are a far more salient indicator of market confidence than headline prices.

Commenting on the data, Steve Lees, Marketing Director of SmartNewHomes.com said:

“As we head into the Christmas period, the housebuilding industry is reflecting on how it has performed this year and looking ahead to 2011. The latest figures from the New Homes Index show that there remains a significant degree of uncertainty in the market.

“We expect to see moderate price gains of 3-5% through 2011, due in part to the inevitable reduction in the number of affordable homes now that the pool of government money for schemes like Kickstart and HomeBuy Direct has run dry. The more pressing question, however, will be what happens to building volumes. Unfortunately, the omens are not encouraging.

“Through 2011, the banks will have to begin the process of repaying money to the government, as well as working with the FSA on regulatory reform for the mortgage market, meaning that in all probability the current mortgage drought is set to get worse before it gets better. In addition, a new and untested planning system, which will not become law until June at the earliest, is delaying schemes and leading the major housebuilders to pursue explicit policies of growing margins rather than increasing volumes. Given that building levels are already at record low levels, the supply of new homes will be one of, if not the, key determiners for the property market as a whole in 2011."

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