Saturday, December 17, 2011

What will 2012 mean for the housing market

property market news today - What will 2012 mean for the housing market : Property prices can be a depressing subject for both home owners and those looking to get a foot on the property ladder. In fact, while estate agents Knight Frank have estimated that the average house prices in the UK will have actually risen by 1.3pc by the end of 2011, with inflation currently at 5pc, property values are falling in real terms.

We asked industry experts for their predictions for what 2012 would mean for the housing market.

Howard Archer, IHS Global Insight
I think house prices will fall by 5pc over the first half of the year and then flat line over the second half. I believe there is a significant risk that house prices could fall more than this given the current weakness of the economy and worrying outlook.

Furthermore, we believe there are serious downside risks to this forecast and that house prices could well fall by more than 5pc given the current deteriorating economic situation and outlook.

We suspect that squeezed household purchasing power, a markedly weakening labour market and major concerns over the economic outlook will limit potential buyers and weigh down on house prices. And there is significant concern that banks' future ability to lend to homebuyers could be hit by difficult wholesale funding conditions. These factors are seen outweighing the support to house prices coming from extended very low interest rates.

The squeeze on consumers' purchasing power should ease as 2012 progresses as inflation falls back markedly, and this may help house prices to stabilise in the second half of 2012 along with ongoing very low interest rates. However, unemployment is likely to rise appreciably further and wage growth looks set to remain muted so the overall environment will still be very tough for households.

Ray Boulger, mortgage brokers John Charcol
The number of housing transactions is currently about half the pre-credit crunch level and next year's outlook is massively influenced by how the Eurozone debt crisis plays out. The major mortgage lenders rely for some of their funding, and in particular for their marginal funding, on the wholesale money markets. As, over the last few months, the markets have become increasingly concerned about how this crisis will be resolved the cost of borrowing new funds has shot up.

If the euro collapses the consequences on our banking sector will be severe because of the global nature of banking and the huge write-offs, which will be necessary on loans made to Eurozone banks which will become insolvent.

The result of this will be that mortgage lenders will have no choice other than to reduce lending which will have a negative impact on the level of activity in the housing market and on property prices.

I expect demand from buyers next year to be lower, primarily as a result of more difficult mortgage conditions, but also because the economic outlook will sap consumer confidence further, with unemployment, or the fear of it, a particular worry for many.

I expect to see the number of property transactions in 2012 fall a little further. I also expect a small fall in house prices, in the region of 4pc, although as this year there will be significant variations throughout the UK and depending on property type.

David Hollingworth, London & Country Mortgages
I'd expect that next year would look broadly similar to this year. Mortgage availability has played a key role in the reduced level of housing transactions and there is very little expectation that next year's mortgage market will be any bigger and could even be a little down on this year.

Overall, it looks like a flat market at best and a reasonable possibility of slight falls, balanced by the lack of property coming to market.

There is likely to be big regional differences in house price movement and so local movement is likely to be of more interest to home owners than overall national trends.

Jon Hall, Saffron Building Society
We see little sign of any increase in base rate, and the lack of confidence in the economy means that house prices are unlikely to do anything spectacular. That said, we are seeing increased signs of activity at the top end of the market, with contract races for premium properties in the South East in particular.

We're also seeing people choosing to invest in refurbishing older properties to achieve greater returns on their capital.

Lee Watts, Kinleigh Folkard & Hayward
I anticipate 2012 to deliver a similar total of property transactions to 2011. I believe the first half of 2012 will be considerably stronger than the second, with early price gains eroded as the year goes on.

We will see further demand in the sales market with an increased supply of stock for lettings due to high rental yields and increasing levels of buy-to-let funding made available by lenders. This will lead to growth and activity within the new homes market with developers confident in developing the land banks they have been building up over the past few years.

I predict the lettings market will experience a healthy volume of business throughout 2012 with an increase in longer-term renting due to property values and mortgage availability making home ownership difficult for first-time buyers to achieve.

Robin King, Move with Us
Next year will be a tale of the haves and have-nots. Those that are able to, will continue to de-leverage using lower interest rates to increase the rate of pay down on their mortgages. Those who find themselves in arrears will continue in arrears as they see the value of their asset eroding while struggling with higher living costs. We do not expect to see lenders pressing for foreclosure until they see an end to this housing market recession. Currently, 5pc of mortgages are showing significant arrears in the UK.

Generally, the housing market will remain flat with low levels of supply on the market as families choose to reduce their mortgages rather than move. Most of the demand for housing will be in the private-rented sector due to the lack of higher loan to value mortgages and the threat of unemployment.

However, it won't be all doom and gloom, there will be hot spots around the country where economic activity has remained strong and where new infrastructure improvements open an area up to commuters in strong economic zones. In areas of low economic activity, we expect to see house prices slide backwards gradually.

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