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Judith Heywood and Ruth Bloomfield
The future is bright for sellers in prime locations. For everyone else, the outlook is more gloom
Househunters will be out in force shopping for a home this year, but those lucky few able to negotiate the many challenges bedevilling the market will be ruthless customers. In the property market of 2010, the prime homes in every location will outperform, but it will take a clever seller to secure a buyer for the rest.
What’s on the buyer wishlist?
Your home needs to be large and lovely, adorned with original features or immaculately finished with tasteful modern decor. It must be near good schools, shops and greenery, as well as having its own outdoor space. Such features are what financial experts like to call “the fundamentals” and, in that spirit of fiscal responsibility, the most in-demand homes must be within reach of work, by train, road or better yet, by bike. Welcome to the property market of 2010.
Only the best will do
Buyers are aware that they have probably missed the bottom of the market (few commentators predict falls on the scale seen over the past two years), but they still want insurance against further upset. According to Lulu Egerton, of the agent Strutt & Parker: “It is no longer about buying on the right street but about buying the best house on the right street.” And if that street happens to be in London, better yet. The capital is forecast to continue to outperform the rest of the UK again as the economy improves faster than that in other regions. Overseas buyers will fuel demand.
The election effect
Just another reason to dread the election. Not only will the protracted campaigning monopolise your papers, TV screens and conversation for months, but it may bring stagnation to the housing market. Agents and economists (still reeling from the surprises of 2009) are struggling to agree on where values will end the year, but almost all believe that the political uncertainty — a hung Parliament, anyone? — and the cutbacks and high taxes that must follow will freeze the property market from the middle of the year. With momentum expected to fall away, Michael Fiddes, of Strutt & Parker, says: “We will be advising those wishing to sell to put property on early.”
Prices go up, and then down?
Will the market’s good mood return once the installation of the next government is complete? Experts disagree. Hamptons International is tipping growth of up to 5 per cent, as homeowners prove eager to get on with their lives, while Chesterton Humberts thinks prices will close this year up 2 per cent. Robert Bartlett, chief executive of Chesterton Humberts, says: “For those living in areas of relatively stable employment, many now have considerably greater disposable income than just a year ago, and are now taking advantage of the historically low mortgage rates.”
But Lucian Cook, the director of research at Savills, enumerates the factors working against a big house price rally as “the prospect of public spending cuts, higher taxes, continuing mortgage rationing, further unemployment, possible stock market correction, inflation or future interest rate rises.” Such factors are among the reasons why Savills predicts headline-grabbing falls of 6.6 per cent this year and a slow recovery thereafter.
It’s all go in the country...
Hamptons International thinks the country house market will remain immune to such gloom, rising by as much as 10 per cent, bringing prices back to 2007 levels. Liam Bailey, the head of residential research at Knight Frank, thinks the prime country sector will hold steady, while the rest of the market falls by 3 per cent.
...and in the Teflon towns
Top-end agents elsewhere are also hoping for a good year. Simon Rubinsohn, chief economist at RICS, says: “The areas that were the pressure points in 2009 — family homes near centres of employment — will continue to outperform.” Bailey tips über-towns such as Oxford, Cambridge and Tunbridge Wells to outperform, along with Cheshire and North Yorkshire. As Cook, of Savills, states, this year will be the one in which “you would rather be in Winchester than in Portsmouth, in Cambridge rather than Ipswich, or Harrogate rather than central Leeds”.
But nothing beats a London address
The continued shortage of property for sale, and demand from those whom Egerton, of Strutt and Parker, lists as active buyers — lawyers, barristers, doctors, dentists, private family trusts and entrepreneurs — will continue to bid up London prices. These gains will be fortified in the prime postcodes by a further influx of foreign buyers keen to take advantage of exchange rates.
Peter Wetherell, the Mayfair agent, says: “Any future weakening of the pound against the dollar or euro will see further interest from abroad as cash investors hedge against monetary inflation.”
Local buyers may struggle to keep up with buyers with access to foreign funds: while interest rates are forecast to stay low, there is yet to be a major loosening of purse strings among the lenders. But other London postcodes may still benefit from the improving economy and demand. King Sturge thinks the benefits will be concentrated in Zones 1 and 2. Lee Watts, of the agent Kinleigh Folkard Hayward, tips across-the-board price rises of 6-7 per cent.
A home for the holidays...
“Prime holiday resorts”— typically those in Devon and Cornwall — will outperform, according to Stuart Law, of Assetz, the property company. They will be shored up by the same affluent classes investing in fine family homes elsewhere.
“Many investors are realising that holiday homes in the UK can be just as attractive as those abroad,” he says. Jackson-Stops & Staff has already reported that its Truro office just completed its busiest and best quarter’s business in two years.
...but no holidays for some
These pockets of growth may not be enough to mask falls elsewhere, and in the new two-tier market, recovery will prove to be a long way off. The North-South divide, which closed in the latter stages of the house-price boom, is opening again.
Savills believes that it could take until 2016 for the North East to return to its 2007 peak, three years after the same feat is achieved across the South. Regional areas, with faltering retail centres and a reliance on public sector employment, are less likely to enjoy a ripple of City and overseas cash and will falter.
Nicholas Leeming, the commercial director of Zoopla.co.uk, says: “Manufacturing areas are still struggling. The Midlands and further north will have a difficult time for another year.” King Sturge predicts postcodes reliant on first-time buyers to lag.
A surge of the wrong kind of supply
Professional investors will still find that their ambitions are curbed by the shortage of credit (they are predicted to benefit from stabilising rents in the second half of the year). They will be cursing lost opportunities, as David Sandeman, of the Essential Information Group, which tracks auctions, predicts a busy year for auctioneers as more forced sales end up in the auction room in 2010, some of them delayed from 2009. The auction room, he expects, will remain the preserve of the cash-rich.
Despite this gloomy prediction and the long wait for regional recovery, agents believe that recovery has set in. But, Catherine Penman, the head of research at Carter Jonas, warns of turbulence. “The market remains delicately poised and certain regions may dip slightly from month to month.” But it is predicted to be what Bartlett, of Chesterton Humberts, calls a “fractured but sustainable recovery”.
This article was published by The Times on 8th January 2010. Please click here to view
