2011 And Beyond - Cluttons' View

A series of forecasts for next year’s residential market will be made this month – first out of the traps is Cluttons, one of the lower profile estate agencies but with a research department well respected by many who know it.

Its forecast is:

• Mainstream sales market will see small falls in early 2011, then stabilising in the second half. 2011 prices will end just 0.1% off their starting point;

• Average mainstream prices will rise 4% in 2012 and 5% in each of 2013 and 2014.

But (and remember I’m advising people to look beyond headline figures to spot the underlying sober stories about the market) Cluttons also identifies a series of risks which may throw its apparently-cheery statistical forecast off course:

• Spending cuts – “it is possible that the impact has been understated”;

• The ability of the private sector to provide more jobs - “the extent to which this occurs in the short term is questionable”;

• Monetary policy – Cluttons expects more quantitative easing in 2011 and says this may provoke higher-than-expected inflation;

• Lending – this will remain tight and the agency reminds us of why there will be no significant increase in lending shortly, namely “the upcoming need for financial institutions to repay various support schemes”;

• Global issues – another ‘Ireland’ or ‘Greece’ could have severe implications for the UK banking sector and could hit “the central London residential sales and lettings markets which are aligned to the fortunes of the financial sector.”

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