The estate agency Savills has come up with new ways of forecasting the housing market for 2011 and beyond.
Instead of average price movements across the country, separated into 'prime' and 'mainstream' and perhaps with a few regional variations, Savills has introduced a far more nuanced assessment. The agency also paints a picture of a fundamental shift in market structure - it no longer assumes we are in a temporary blip from the 'normality' of 2000 to 2007, but are instead in a permanently slower market.
- transactions remain low, about 56pc of peak, and will stay that way;
- 53pc of private housing stock is mortgage-free or low-mortgage, and the vast majority of house moves are within this category;
- cuts and unemployment will hit the market harder and for longer than expected;
- mortgage restraint is lasting longer than expected and will never again allow large scale kending of the type that fuelled the market between 2004 and 2007;
- Savills says prices of different property types in different locations will perform in different cycles. The agency uses commercial-style categories of Grade A (best in class houses); Grade B (the mainstream bulk); and Grade C (low-end, possibly best measured by rental yield rather than very low or negative capital appreciation);
- Savills then says examples of the A, B and C homes can be seen in three different types of location, which are Prime, Secondary and Tertiary;
- Although unfamiliar to many residential market onlookers, this presents the kind of fine grain of analysis that estate agents have asked the press to report on. In other words, it stops the illusion of 'one market' and instead factors in location, property type and tenure to a far greater degree than done before. If property journalists pick this up, it will allow a better understanding of the factors that contribute to house values than current 'too broadbrush to be useful' indices;
- Savills says mainstream house prices will not return to their 2007 peak until 2016, making this a decade-long slump. Grade A examples in prime and secondary locations may, of course, appreciate more and sooner, while Grade C may not get back to peak even for years beyond that;
- Prime central London prices will return to peak in 2012 (of course many of those Grade A examples have done so already) while prime properties in the regions, particularly south east and south west England, will be back by 2014;
- There will be a large, and growing, gap between north and south of England.
This has been a long blog but it's an important subject. At the launch of these predictions I sat next to a property editor, fairly new to the business, who said his predecessor had commented that if there was one event in the year to go to, it was the Savills annual forecast seminar. Expect it to set the agenda in the next few months.
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